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HomeMy WebLinkAbout1999-01-11 City Council (9)City of Palo Alto C ty Manager’s Report TO:HONORABLE CITY COUNCIL PLANNING COMMISSION FROM:CITY MANAGER DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT DATE:JANUARY 11, 1999 CMR: 112:99 SUBJECT:COMMERCIAL DOWNTOWN (CD) MONITORING REPORT FOR SEPTEMBER 1, 1997 TO AUGUST 31, 1998 This is an information report and no action is required. BACKGROUND This is an annual monitoring report on the Commercial Downtown (CD) zoning area. These reports are mandated by Comprehensive Plan Programs L-8 and L-9 that require reporting of non-residential development activity and trends withinthe CD zone district. These reports are required as a result of f’mal action on the Downtown Study approved by City Council on July 14, 1986. Attached is the Downtown Study Results Summary of the actions taken in 1986 (Attachment A) and a zone map of the Downtown CD districts (Attachment B). Due to limited staff availability and other priorities, a report was not submitted for’ the monitoring period of September 1, 1996 through August31, 1997. This report includes the cumulative data from September 1, 1996 through August 31, 1997 and has specific data and information for the September 1, 1997 to August 31, 1998 monitoring period. Staff regularly tracks changes in floor area and parking in the CD district resulting from approved development. Field visits and telephone interviews are conducted to determine current vacancy rates, trends in use composition and prevailing rents. DISCUSSION Palo Alto’s Downtown continues to demonstrate strong economic health. Non-residential development activity in Downtown continued at a steady pace during the current monitoring period. Vacancy rates remained very low, and groundfioor vacancies in the Ground Floor (GF) Combining District are ~¢ery low. The rents for retail and office space appear to have flattened, at least temporarily. CMR: 112:99 Page 1 of 6 A primary factor in the continued vitality of Downtown is the presence of major employers and institutions, including the City of Palo Alto offices, several major law firms, nearby health care facilities, the proximity of Stanford University and a strong collection of design, graphic and high-tech related companies. Collectively, these businesses and institutions, through their employees, clients, faculty~ and students, make a significant contribution to Downtown Palo Alto. The following are separate discussions on the reporting areas required by the Downtown Study. Non-residential Development Activity. The Downtown Study incorporated a growth limit of 350,000 square feet of additional floor area above the total floor area existing in 1986, and provides for a re-evaluation of the CD regulations when new development reaches 235,000 square feet. Since 1986, a total of 83,025 square feet has been added in the downtown area; therefore, no further evaluation is required. The changes in non-residential square footage are shown on Attachment C. Projects Demonstrating Special Public Benefits The Downtown Study reserved 100,000 square feet of the 350,000 square foot cap to be used for projects demonstrating special public benefits. Since 1986, eight projects in the downtown area have utilized the Planned Community zoning that requires a finding of public benefit. Five of the projects exceeded the floor area that would otherwise be allowed under zoning by a total of 34,378 square feet. These projects are shown in the 4th column of Attachment C. The remaining three projects were mixed use projects that did not exceed allowed non-residential floor areas. All of the projects either provided parking or paid a fee in-lieu of providing parking. No further evaluation is required at this time. Projects Qualifying for Seismic, Historic or Minor Expansion Exemptions The Downtown Study set aside 75,000 square feet of the 350,~)00 square foot cap for projects that qualify for seismic, historic or minor expansion exemptions in order to encourage these upgrades. Since 1986, 38,840 square feet have been added in this category. These projects are shown in the 5th column of Attachment C. ¯ Parking Inventory. At the time of the Downtown Study, performance measures were established that specify that new development in the Downtown should not increase the total parking deficit beyond that expected from development that was existing or approved through May 1986,’ or 1,601 spaces. A re-evaluation of the parking exemption regulations is to be done when the unmet parking demand, resulting from exemptions, reaches 225 spaces or 1,826 spaces. At the time 0fthe Downtown Study, 225 represented one-half the minimum 450 parking spaces deemed necessary for construction of new public parking structure. CMR: 112:99 Page 2 of 6 Attachment D is a chart of the CD parking deficit. The current total deficit is 1,464 spaces. Through various projects the actual parking deficit has been reduced. Most notable are: 1) the two floor addition to the Cowper/Webster Garage and 2) significant restriping of on- street parking spaces by the City’s Transportation Division. However, it should be noted that because the CD zoning uses a blended rate of 1 space per.250 square feet of added floor area, the intensity of use of some buildings has increased without additional parking spaces being required. Even though the threshold for considering additional parking structures in the CD district has not been reached, the downtown property owners, merchants and the City are pursuing new parking structures. Five projects have paid a total of $984,604 in-lieu of providing 55’ parking spaces. One additional project has been approved with an in-lieu payment for 24 spaces. Vacancy Rate for Ground Floor (GF) Combining District The Ground Floor Combining District (GF) was created to encourage active pedestrian uses in the downtown area. Other uses besides retail, eating and drinking, personal services and a few conditional uses may be allowed through an exception process. One of the requirements for making the exception is that the GF vacancy rate must be greater than 5 percent. In September 1998, there were 624, 330 square feet of GF area after adjusting for 1997 and 1998 projects. In the staff survey of downtown vacancies in September 1998, only three properties, totaling 12,734 square feet, met the requirements for vacant and available ground floor area. They were: 339 University Avenue ....................4,200 430 University .....................’ ......4,000 482 University ...........................4,534 TOTAL ...............................12,734 This results in a vacancy rate of approximately 2.1 percent (12,735 + 624,330); therefore exceptions will not be permitted for consideration until the next survey results in September, 1999. VacancyRate for Entire CD District For purposes of tracking the health of the downtown area, the vacancy rate for the entire CD area is reported. This figure does not affect any of the exception or Downtown cap regulations. At the time of the September 1998 staff survey, the following were vacant and available: CMR: 112:99 Page 3 of 6 CD-C(GF) TABLE 1: Commercial Downtown (CD) Vacant & Available Floor Area As of September, 1998 (Includes Upper Floor Office Space) 575 High Street 339 University 430 University 482 University 530 University Office Financial Services New Retail Office VACANT 2,150 Sq. Ft 4,200 Sq. Ft 4,000 Sq. Ft 4,534 Sq. Ft 7,267 Sq. Ft CD-C 100 Hamilton Avenue Office 16,075 Sq. Ft CD-S 161 Homer Personal Service-1,446 Sq. Ft 171 Forest Office 1,300 Sq. Ft CD-N 120 Hawthorne Office 2,756 Sq. Ft. PC TOTAL 43,728 Sq. Ft. The entire CD area has approximately 3,625,000 gross square feet of floor area. Of this, about 400,000 is used for religious or residential purposes or is vacant and not available for occupancy. Thus the gross square footage of available commercial space is 3,225,000 square feet (3,625,000 - 400,000 = 3,225,000). With a total 3,225,000 square feet of commercial floor area available for occupancy (see Table 2, below) the 43,728 square feet of vacancy equals a rate of 1.4 percent (43,728 + 3,225,000). Trends in Use Composition The primary observation of change in the use composition of Downtown since the enactment of new CD zoning regulations in 1986 is that the total floor area devoted to certain higher- intensity commercial uses (office, retail, eating and drinking) has increased, while the total floor area in lower-intensity commercial uses (manufacturing, warehousing) has been reduced (see Table 5, below). This trend has continued in the past few years with an increase in higher intensity eating and drinking establishments. CMR: 112:99 Page 4 of 6 TABLE 2’" Use Category Commercial Downtown (CD) Floor Area by Use Category (Rounded to the nearest 25,000 square feet) Floor Area Estimated Floor (10/86)Area (9/98) 1,100,000 1,250 000 500,000 150,000 200,000 150,000 175,000 100,000 75,000 150,000 50,000 ~50,000 25,000 50,000 50,000 50,000 50,000 250,000 50,000 150,000 0 150,000 3,625,000 625 000 225 000 200000 175 000 125 000 150 000 100 000 100 000 50,000 75,000 50,000 25,000 25,000 0 50,000 300,000 25,000 25,000 0 50,000 3,625,000 1. "Offices 2. Retail 3. Eating & Drinking 4. Financial Services 5. Business Services 6. Basement Storage 7. Hotels 8. Personal Services 9. Utility Facility 10. Public Facilities 11. Automotive Services 12. Recreation/Private Club 13. Theaters 14. Warehousing & Distribution 15. Manufacturing 16. Religious Institutions 17. Multi-Family Residential 18. Single Family Residential 19. Vacant & Under Construction 20. Vacant & For Sale 21. Vacant & Available Total %Change (10/86- 9/98) 13.6% 25.0% 50.0% 0.0% 16.7% -28.6% 50.0% 33.3% -33.3% 0.0% -50.0% 100.0% -50.0% -50.0% -100.0% 0.0% 20.0% -50.0% -83.3% 0% -66.7% 0% ADJUSTED TOTAL: (Deduct residential uses, religious institutions, vacant & for sale and vacant & under construction.) 3,125,000 3,225,000 *The above table is rounded to the nearest 25,000 square feet and was based on a table originally prepared in 1986. Over the years, because of the rounding to 25,000 square foot increments, the table has had a greater margin of error. Staff has attempted in 1998 to update the table from the beginning; therefore the numbers will not compare directly to the previously prepared tables. Retail Rents According to commercial real estate agents offering properties for lease in Downtown, current rents for retail space are generally ranging from $2.50 to $4.00 per square foot triple net (NNN) (i.e. rent plus tenant assumption of insurance, janitorial services and taxes) with a few higher rates reported. The lower end of this range is generally for spaces in older buildings and away from University Avenue. Office Rents Current rents for prime Downtown office space (i.e. newer and/or larger buildings on CMR: 112:99 Page 5 of 6 University Avenue and Lytton Avenues) and secondary office space (i.e. older and/or smaller buildings further from University Avenue) are ranging from $3.20 to $5.25 per square foot triple net (NNN). Rental rates have increased since the last monitoring period, but appear to have flattened, at least temporarily. POLICY IMPLICATIONS This report and its findings do not represent any changes to current City policies. ATTACHMENTS A. Downtown Study Results Summary B. Zone Map exhibit of the Commercial Downtown (CD) Zone District C. Table: CD Non-Residential Change in Square Footage D. Table: CD Parking Deficit ~ PREPARED BY:James E. Gilliland, Assistant Planning Official G. EDWARD GAWF Director of Planning and Community Environment EMIL’~-"HARRISON Assistant City Manager Architectural Review Board ’ Palo Alto Chamber of Commerce Palo Alto Board 0fRealtors Downtown North Neighborhood Association University Park Neighborhood Association CMR: 112:99 Page 6 of 6 ATTACHMENT A DOWNTOWN STUDY RESULTS SUMMARY (July 1986) The following are the primary measures adopted as a result of the study: A new Commercial Downtown (CD) zoning district, including three subdistricts (CD-C, CD-S and CD-N), was created and applied to most of the Downtown area previously zoned Community Commercial (CC) or Service Commercial (CS). The basic provisions of the CD district include floor area ratios (FARs) that are more restrictive than in the previous CC and CS zones, limits to project size and to the overall amount of future development, and special development regulations for sites adjacent to residential zones. Growth limits were applied to the CD district restricting future development to a total of 350,000 square feet beyond what was existing or approved in May 1986 and providing for a re-evaluation of the CD regul,at, ions when new development reaches 235,000 square feet. In addition, 100,000 square feet of the total new floor area was reserved for projects demonstrating special public benefits and 75,000 square feet for projects which qualify for seismic, historic or minor expansion exemptions. Exemptions to the floor area ratio restrictions of the CD zone were established for certain building expansions involving historic structures, seismic rehabilitation, provision of required handicapped access, Or one-time additions of 200 square feet or less. New parking regulations were established for the University Avenue Parking Assessment District that require new non-residential development to provide parking at a rate of one space per 250 square feet of floor area. Exemptions to this requirement are provided for certain increases in floor area related to provision of handicapped access, seismic or historic rehabilitation, one-time minor additions (200 square feet or less) and development of vacant land previously assessed for parking. The regulations also permit, in certain instances, off-site parking and parking fees in lieu of on-site parking. Performance measures were established that specify that new development in the Downtown should not increase the total parking deficit beyond that expected from development that was existing or approved through May, 1986 (1600 spaces) and that call for re-evaluation of the parking exemption regulations when the unmet parking demand, resulting from exemptions, reaches one half (225 parking spaces) of the minimum 450 parking spaces deemed necessary for construction of a new public parking structure. Staff was directed to monitor the parking deficit. A new Ground Floor (GF) Combining District was created and applied to the area along University Avenue and portions of the major side streets between Lytton and Hamilton Avenues, in order to restrict the amount of ground floor area devoted to uses other than retail, eating and drinking or personal service. Staff was. directed to monitor the Downtown area in terms of development activity, vacancy rates, sales tax revenues, and commercial lease rates to facilitate evaluation of the effectiveness of the new regulations. o Staff was directed to undertake a site and feasibility study to evaluate an additional public parking structure elsewhere in the Downtown, to consider development of a parking facility on public lots S, L and F, and to explore the possibility of leasing or purchasing privately-owned vacant lots suitable as parking structure sites. Policies and r.egulations were adopted which encourage Planned Community (PC) zoning for parking structures and limit underground parking to two levels below grade, unless there is proof that regular pumping of subsurface water will not be necessary. 10.A Twelve-Point Parking Program was adopted to increase the efficiency of existing parking. 11.Traffic policies were adopted which prohibit new traffic signals on portions of Alma Street and Middlefield Road, and prohibit a direct connection from Sand Hill Road to Palo Alto/Alma Street. In addition, new signs were approved directing through traffic off of University Avenue and onto Hamilton and Lytton Avenues. 12. 13. Staff and the Architectural Review Board (ARB) were directed to consider the possibility of an Urban Design Plan for Downtown and to develop design guidelines for commercial structures in neighborhood transition areas and for driveways which cross pedestrian walkways. A temporary Design and Amenities Committee was created and charged with developing an incentive program (including FAR increases of up to 1.5) to encourage private development to provide a variety of public amenities in the Downtown area. 14.Staff was directed to study possible restrictions on the splitting and merging of parcels as well as the establishment of minimum lot sizes in the new CD district. Attachment B .. Ax- ~o K _:..._Y \’<.\ ~- ~ ,. , ~~~ PF This map is a product Commercial Downtown City of P~o Alto GIS C Zone District © Z C,0 o o oo z~T ,,,"+ ,P,z-Nq Z ___~: ,,,0’ m7 Z oo L: % 00 00 U 121 U_l z~ u nO Z oo oo iii W Z 0 a D U o Un U