HomeMy WebLinkAboutStaff Report 135-07City
City of Palo Alto
Manager’s Report
TO:HONORABLE CITY COUNCIL MEMBERS
FROM:CITY MANAGER DEPARTMENT: PLANNING AND
COMMUNITY ENVIRONMENT
DATE:MARCH 5, 2007 CMR:135:07
SUBJECT:COMMERCIAL DOWNTOWN (CD) MONITORING REPORT FOR
SEPTEMBER 1, 2005 TO AUGUST 31, 2006
This is an information report and no Council action is required.
BACKGROUND
An annual monitoring report on the Commercial Downtown (CD) zoning area is mandated by
Comprehensive Plan Programs L-8 and L-9 that require reporting of non-residential development
activity and trends within the CD zone district. These reports are also required as a result of final
action on the Downtown Study approved by the 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).
This report includes cumulative data from January 1987 through August 31, 2006 and.has specific
data and information for the September 1, 2005 to August 31, 2006 monitoring period. Staff
regularly tracks vacancy rates, changes in floor area and parking in the CD district resulting from
approved development. Staff completed field visits for this monitoring period in December 2006.
Telephone interviews with leasing agents were conducted thereafter and completed in December
2006 to determine current vacancy rates and prevailing rents.
DISCUSSION
Palo Alto’s downtown demonstrates increased economic health, with the overall vacancy within
the Commercial Downtown (CD) zoning district decreasing to its lowest point in five years. The
rental rates for both retail and office rental rates have increased slightly relative to the 2005
monitoring period attributable to this monitoring period’s low vacancy rates. (See page 7 for
further discussion).
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 provided for a re-evaluation of the CD regulations
when new development reaches 235,000 square feet. Since 1986, a total of 105,937 square feet of
non-residential uses have been added in the Downtown area. This includes the net reduction of
approximately 2,799 square feet at 164 Hamilton Avenue and the net increase of approximately
CMR:135:07 Page 1
5,279 square feet at 335 University and 194 square feet at 382 University. This allows an
additional 129,063 square feet of new non-residential development to occur before a re-evaluation
of the CD regulations is necessary.
Demonstrating Special Public Benefits
The Downtown Study reserved 100,000 square feet of the 350,000 square foot growth limit to be
used for projects demonstrating special public benefits. Since 1986, ten projects in the downtown
area have been developed under the Planned Community zoning that requires a finding of public
benefit. Five of the projects exceeded the non-residential floor area that would otherwise be
allowed under zoning by a total of 34,378 square feet. The total of these projects is shown in the
4th column of Attachment C; all the projects were approved before August 31, 1998. The
remaining five 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.
Projects Qualifying for Seismic, Historic or Minor Expansion Exemptions
The Downtown Study set aside 75,000 square feet of the 350,000 square foot cap for projects that
qualify for seismic, historic or minor expansion exemptions in order to encourage these upgrades.
Since 1986, 65,255 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. In 2003, the
City opened two new parking structures; one located on 528 High Street, the other at 445 Bryant
Street, effectively decreasing the original 1986 deficit by almost half, to 836 spaces. At the end of
the 2003 monitoring period, the City determined a re-evaluation of the parking exemption
regulations would be done when the unmet parking demand resulting from exemptions reaches a
cumulative 450 spaces. Attachment D is a chart of the CD parking deficit. Through various
projects, the actual parking deficit has been significantly reduced. Most notable are: 1) the
two-floor addition to the Cowper/Webster Garage, 2) significant restriping of on-street parking
spaces by the City’s Transportation Division resulting in 96 additional spaces, and 3) the
construction of the two previously mentioned parking structures located on 528 High Street and
445 Bryant Street.
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. Uses other than 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 December
2006, there were approximately 624,330 square feet of GF area. In the staff survey of Downtown
vacancies in December 2006, there were 4.properties, totaling 15,350 square feet, which met the
requirements for vacant and available ground floor area. They were:
CMR:135:07 Page 2
Address
525
529
526
382
&lma
Alma
Bryant
University
Vacant
Feet
5100
6000
2600
1650
Square
Total 15,350
This results in a vacancy rate of approximately 2.46 percent; therefore, exceptions will not be
permitted for consideration. Although the Ground Floor vacant square footage increased slightly
from last year’s report, the number of vacant spaces decreased from 5 vacant properties last year to
4 vacant properties this year.
Vacancy Rate for Entire CD District
For purposes of tracking the economic viability of the Downtown area, the Vacancy rate for the
entire CD area is reported. This figure does not affect any of the exceptions or Downtown cap
regulations. At the time of the December 2006 staff survey, the following were vacant and
available:
TABLE 1: Commercial Downtown (CD) Vacant & Available Floor Area
As of December, 2006
(Includes Upper Floor Office Space)
145
291
525
335
518
514
!644
151
203
650- 654
100
CMR:135:07
Addisson
Alma
Alma
Bryant
Bryant
Bryant
Emerson
Forest
Forest
Gilman
Hamilton
RT35*
CD-N (P)
CDCGFP
CD-C (P)
CDCGFP
CDCGFP
!CD=C (P)
CD-S (P)
CD-C (P)
CD-C (P)
CD-C (P)
Page 3
3,850
1,700
3,241
2,500
400
2,238
2,118
4,626
1,189
14,502
236
261
285
654
130
181
636
Hamilton
Hamilton
Hamilton
High
Lytton
Lytton
Ramona
CD-C (P)
CDCGFP
CDCGFP
CD-C (P)
CD-C (P)
iCD-C (P)
CD-C (P)
6,700
372
9,781
5,551
5,246
21,267
4,750
CD - Commercial Downtown (C) - Commercial (N)- Neighborhood (S) - Service
GF - Ground Floor Combining District
P - Pedestrian Overlay
RT - Residential Transition
Address
101
165
525
635
iTotal
University
University
University
Waverley
Part of the SOFA 2 CAP
Zoning District
CD-C (P)
CDCGFP
CD-C (P)
CD-C (P)
101,254
Vacant Square Feet
4,015
1,300
1,538
4,370
CD - Commercial Downtown (C) - Commercial (N)- Neighborhood (S) - Service
GF - Ground Floor Combining District
P - Pedestrian Overlay
RT - Residential Transition
The entire CD area has approximately 3,825,000 gross square feet of floor area including
approximately 330,000 square feet within the SOFA CAP Phase 2 area. About 475,000 square feet
is used for religious or residential purposes or is vacant and not available for occupancy. Thus the
net square footage of available commercial space is 3,350,000 square feet.
With a total 3,350,000 square feet of commercial floor area available for occupancy, the vacant
101,254 square feet equals a rate of 3.02 percent.
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) and housing
CMR: 135:07 Page 4
has increased, while the total floor area in lower-intensity commercial uses (manufacturing,
warehousing) has been reduced (see Table 2). This trend has continued in the past few
years with an increase in multi-family housing and eating and drinking establishments.
TABLE 2*: Commercial Downtown (CD) and SOFA 2 CAP Floor Area by Use Category
Use Category
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
13. Theaters
14. Warehousing &
Distribution
15. Manufacturing
16. Religious Institutions
17. Multi-Family
18. Single Family
~9. Vacant & Under
Construction
20. Vacant & For Sale
21. Vacant & Available
Total
ADJUSTED TOTAL:
(Deduct residential uses, religious
institutions, vacant & for sale and
vacant & under construction.)
(10/86)
1,100,000
500,000
150,000
200,000
150,000
175,000
100~000
75,000
150,000
50,000
150,000
25,000
50,000
50,000
50,000
50,000
250,000
50,000
150,000
0
150,000
3,625,000
3,125,000
(10/05)
1,275,000
650,000
250,000
200,000
175,000
100,000
150,000
125,000
100,000
75,000
50,000
50,000
25,000
25,000
0
50,000
400,000
25,000
25,000
0
100,000
3,825,000
3,350,000
(10/86-1
15.91%
30.00%
66.67%
0.00%
16.67%
-42.86%
50.0O%
66.67%
-33.33%
50.0O%
-66.67%
100.00%
-50.00%
-5O.OO%
-100.00%
O.OO%
50.00%
-50.00%
-83.33%
-33.33%
5.52%
o/o5)
Rounded to the nearest 25,000 square feet)
* 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 attempted to update the table from the
beginning in 1998; therefore the numbers may not compare directly to tables prepared prior to the
1998 report.
CMR: 135:07 Page 5
Retail Rents
According to the data gathered from the December 2006 staff survey of commercial real estate
agents offering properties for lease in Downtown, rents for retail space are generally ranging from
$3.50 to $6.00 per square foot triple net (i.e. rent plus tenant assumption of insurance, janitorial
services and taxes). The lower end of this range is generally for spaces in older buildings and away
from University Avenue. Rental rates have increased since the last monitoring period
corresponding with the low vacancy rate within the Commercial Downtown area.
Office Rents
According to the data gathered from the December 2006 staff survey of commercial real estate
agents offering properties for lease in Downtown, rents for Class A Downtown office space (i.e.
newer and/or larger buildings on University Avenue and Lytton Avenues) and Class B office space
(i.e. older and/or smaller buildings further from University Avenue) are ranging from $2.50 to
$6.50 per square foot triple net. Office rental rates also have increased since the last monitoring
period. This is the first time office rents have increased in the Commercial Downtown area in the
last 5 years.
ATTACHMENTS
A. Downtown Study Results Summary (1986)
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:
DEPARTMENT HEAD REVIEW:
Director of Planning and Community Environment
CITY MANAGER APPROVAL:
KELLY MORARIU
Assistant to City Manager
Architectural Review Board
Palo Alto Chamber of Commerce
Palo Alto Board of Realtors
Downtown North Neighborhood Association
University Park Neighborhood Association
CMR: 135:07 Page 6
Attachment A
DOWNTOWN STUDY RESULTS SUMMARY (luly 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.
o 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 regulations 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.
o 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.
o 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 regulafons 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.
Page
12.
13.
14.¸
Staff was directed to monitor the Downtoml 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.
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 explor~ the possibility of leasing or purchasing
privately-owned vacant lots suitable as parking structure sites.
Policies and regulations 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.
A Twelve-Point Parking Program was adopted to increase the efficiency of existing patking.
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.
Staff and the Architectural Review Board (ARB) were directed to consider the possibility of
an Urban Desigu 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 vat-iety of public amenities in the Downtoma area.
Staffwas 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.
Page 2
Attachment B
Legend
~.",~c,~~ SOFA 2 Area
CD Zones
~.,~=~ Parking Assessment Districts
The City of
Palo Alto
Attachment B
CommercialDowntown (CD)and
SOFA 2 CAP.Area
Zoning Designations
This map is a product of the
City of Palo Alto GiS
550’
This document is a graphic representation enly of best ava~able sources.
The City of Pa[o Alto assumes no responsiNlity for any eno~ @1989 to 2004 City of PaSo
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