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HomeMy WebLinkAboutStaff Report 208-08City of Palo Alto City Manager’s Report TO:HONORABLE CITY COUNCIL PLANNING COMMISSION FROM:CITY MANAGER DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT DATE:MAY 5, 2008 CMR:208:08 SUBJECT:COMMERCIAL DOWNTOWN (CD) MONITORING REPORT FOR SEPTEMBER 1, 2006 TO AUGUST 31, 2007 This is an information report and no Council action is required. BACKGROUND An annual monitoring report on the Commercial Dov~ntown (CD) zoning area is mandated by Comprehensive Plan Pro~ams L-8 and L-9. These programs 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 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, 2006 to August 31, 2007 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 i,n December 2007. Telephone interviews with leasing agents were conducted thereafter and completed in January 2008 to determine current vacancy rates and prevailing rents. DISCUSSION Palo Alto’s downtown demonstrates increased economic health, with the overall vacancy v~4thin the Commercial Downtown (CD) zoning district decreasing to its lowest point in five years. The rental rates for both retail and office have increased slightly relative to the 2005 monitoring period attributable to this monitoring period’s low-vacancy rates. (See page 5 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 105,945 square feet of non-residential uses have been added in the Dov~ntov~n area. Much of the construction in the CMR: 208:08 Page 1 of 6 Commercial Dow-ntow-n area during the 2006-2007 monitoring period did not generate a net gain in non-residential square footage. Based on this recent monitoring, an additional 129,063 square feet of new non-residential development can be developed before a re-evaluation of the CD regulations is necessary. Demonstratin~ Special Public Benefits The Dove, town Study reserved !00,0..00 square feet of the 350,000 square foot ~owth limit to be used for projects demonstrating special public benefits. Since 1986, ten projects in the downtow-n 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 changes in square footage of these projects are 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 allowable non-residential floor areas. All of the projects either provided parking or paid a fee in lieu of providing par’king. 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 upgades. Since !986, 65,255 square feet have been added in this category. These projects are shown in the 5th column of Attachment-C. Parkin~ 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 and the other at 445 Bo, ant Street. This decreased 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. As of Augmst of 2007, the unmet parking demand resulting from exemptions is 237 parking spaces. Through various projects, the total cumulative parking deficit has been significantly reduced from 1,601 in 1986 to 774 in 2007. Most notable reasons for the reduction 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. Attachment D is a chart of the CD (Commercial Downtown) parking deficit. CMR: 208:08 Page 2 of 6 Vacancy Rate for Ground Floor (GF) Combining District The Ground Floor Combining District (GF) was created to encourage active pedestrian uses in the downtow~ 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 2007, there were approximately 624,330 square feet of GF area. In the staff survey of Downtown vacancies in December 2007, there were 9 properties, totaling 18,330 square feet, which met the requirements for vacant and available ground floor area. They were: Vacant Square Address Feet .~9 Alma 2 400 115 Hamilton 1,600 530 Emerson 2,500 540 Emerson 1,850 125 University 120 135 University 3,000 151 University 3,060 174 University 2.300 530 University 1,500 Total 18,330 This results in a vacancy rate of approximately 2.94 percent; therefore, exceptions will not be permitted for consideration during the next year. In comparison, last year’s Ground Floor vacant square footage was slightly lower at 2.46 percent or 15,350 square feet. 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 Downtov~ cap regulations. At the time of the December 2007 staff survey, the following were vacant and available: CMR: 208:08 Page 3 of 6 36O 514 518 635 541 895 100 459 654 212 435 125 135 360 525 53O TABLE 1: Commercial Dov~mtown (CD) Vacant & Available Floor Area Address Bryant Bryant Bryant Bryant Bryant Bryant Bryant Emerson Hamilton Hamilton High Homer Tasso University University7 University University University As of December, 2006 ~ncludes Upper Floor Office Space) Zoning District CD-C (P) CD-C (P) CD-C (P) CD-C (GF)(P) CD-C (GF)(P) CD-C (P) CD-C (GF)(P) RT-35" CD-C (P) CD-C (P) CD-C (P) RT-35* CD-C (P) CD-C (GF)(P) CD-C (GF)(P) CD-C (GF)(P) CD-C (P) CD-C(GF)(P) CD - Commercial Downtown (C) - Commercial (N) - Neighborhood (S) - Service GF - Ground Floor Combining District P - Pedestrian Overlay RT - Residential Transition Vacant Square Feet 7,107 3,241 2,775 200 2.500 1,232 2.353 4.000 6,956 774 4,307 3,100 4,449 606 6,500 3,850 6,418 5,000 CMR: 208:08 Page 4 of 6 Address 558 Waverley 635 Waverlev Total * Part of the SOFA 2 CAP Zoning District CD-C (GF)(P) CD-C (P) Vacant Square Feet 300 4,370 70,038 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 approximately 3,350,000 square feet. With a total 3,350,000 square feet of commercial floor area available for occupancy, the vacant 70,038 square feet equals a rate of 2.09 percent compared to 3.02 percent in last year’s monitoring report. The current vacancy rate of 2.09 percent is the lowest overall vacancy rate for the CD District in the last 6 years. 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-intensi~ commercial uses (office, retail, eating and drinking) and housing has increased, while the total floor area in lower-intensity commercial uses (manufacturing, warehousing) has been reduced (see Attachment E). This trend has increased in the past few- years with development of additional multi-family housing and eating and drinking establishments. Retail Rents According to the data gathered from the December 2007 staff survey of commercial real estate agents offering properties for lease in Downtown, rents for retail space are generally ranging from $3.25 to $7.25 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 2007 staff survey of commercial real estate agents offering properties for lease in Downtown, rents for Class A Downtow-n office space (i.e. CMR: 208:08 Page 5 of 6 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 $3.85 to $5.85 per square foot triple net. POLICY IMPLICATIONS This report on the Commercial Downtown (CD) zoning area is mandated by Comprehensive Plan Pro~ams L-8 and L-9 and by the Dov~-ntown Study approved by the City Council on July 14, 1986. RESOURCE IMPACT This report has no impact on resources. ENVIRONMENTAL REVIEW This is an informational report only and is exempted from CEQA review. ATTACHMENTS A. Dow-ntown 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 E. Table: Commercial Downtown (CD) and SOFA 2 CAP Floor Area by Use Category PREPARED BY: Roland Rivera, Seni6r Planner DEPARTMENT HEAD REVIEW: ./i~i ; .:" ~"~./" i /STEVE EMSEIE Director of Planning and Community Environment CITY MANAGER APPROVAL: EMILY HARRISON Assistant City Manager Architectural Review Board Palo Alto Chamber of Commerce Palo Alto Board of Realtors Downtow-n North Neighborhood Association University Park Neighborhood Association CMR: 208:08 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 Downtm~m 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 residentia! 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. Exemptions to thefloor 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 Universit3; 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 par-king 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 wound floor area devoted to uses other than retail, eating and drinking or personal service. Page 1 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. 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-orated vacant lots suitable as parking structure sites. Policies and regulations were adopted which encourage Planned Community (PC) zoning for parking structures and limit under~ound 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 Pro~am 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.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. 13.A temporary Design and Amenities Committee was created and charged with developing an incentive progam (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. Page 2 Attachment B Fulton Street Road Kit~lin~ Street ~ Legend ~: ~o~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’ ©© t~ ÷ ÷ ÷ t~j t~ b~ © © © © o Attachment E Commercial Downtown (CD) and SOFA 2 CAP Floor Area by Use Category Use Category..(10/86)(10/05)(10/86-10/05) 1. Offices 1.100.000 1.275.000 15.91% 2. Retail 500.000 650.000 30.00% 3. Eating & Drinking 150,000 250.000 66.67% 4. Financial Services 200.000 200.000 0.00% 5. Business Services 150,000 175.000 16.67% 6. Basement Storage 175.000 100.000 -42.86% 7. Hotels 100.000 150.000 50.00% 8. Personal Services 75.000 125.000 66.67% 9. Utility Facility 150.000 100.000 -33.33% 10. Public Facilities 50.000 75.000 50.00% 11. Automotive Services 150.000 50.000 -66.67% 12. Recreation!Private Club 25,000 50.000 100.00% 13. Theaters 50.000 25.000 -50.00% 14. Warehousing &50,000 25,000Distribution .......50.00% ! 5. Manufacturing 50.000 0 -100.00% 16. Religious Institutions 50,000 50,000 0.00% 17. Multi-Family Residential 250.000 400.000 50.00% 18. Single Family Residential 50,000 25,000 -50.00% 19. Vacant & Under Construction 150.000 25.000 ~ -~ -, o-8.~..~_~ Vo 20. Vacant & For Sale 0 0 21. Vacant & Available 150.000 100.000 -33.33% Total 3,625,000 3,825.000 5.52% ADJUSTED TOTAL: (Deduct residential uses, religious institutions, vacant & for sale and vacant & under construction.) 3,125,000 3,350,000 (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. Page 1