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HomeMy WebLinkAboutStaff Report 117-06TO:HONORABLE CITY COUNCIL PLANNING COMMISSION FROM:CITY MANAGER DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT DATE:JANUARY 17, 2006 CMR: 117:06 SUBJECT:COMMERCIAL DOWNTO’~VN (CD) MONITORING REPORT FOR SEPTEMBER 1, 2004 TO AUGUST 31, 2005 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 fin!l action on the Dov~towa Study approved by the City Council on July 14, 1986. Attached is the Downtown Study Results Smnmary of the actions taken in 1986 (Attachment A) and a zone map of the Downtown CD districts (Attactm~ent B). This report includes cumulative data from January 1987 through August 31, 2005 and has specific data and information for the September 1, 2004 to August 3 t, 2005 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 November 2005. Telephone interviews with leasing agents were conducted thereafter and, completed in December 2005, to determine current vacancy rates and prevailing rents. DISCUSSION Palo Alto’s downtown demonstrates improved economic health, with both the vacancy rate within the first floors of Downtow~ commercial buildings (subject to Ground Floor [GF] Combining District regulations) and the overall vacancy within the Commercial Downtown (CD) Zoning District decreasing from the 2004 monitoring period. The rental rates for both retai! and office rental rates have remained stable relative to the 2004 monitoring period. (See page 7 for further discussion). Last year’s monitoring report addressed a change in area for the CD zone as a result of the adoption in December 2003 of the South of Forest Area (SOFA) Coordinated Area Plan (CAP), Phase 2. Part of the SOFA CAP Phase 2 adoption included the rezoning of 66 parcels zoned Commercial Dowx~town (CD) to Residential Transition (RT) Districts. The rezoned area will continue to be tracked and reported in the Commercial Downtow~ Annual Monitoring and wlql be identified as part of the SOFA CAP Phase 2. CMR: 117:06 Page 1 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 105,743 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 5,279 square feet at 335 University. This allows an additional 129,257 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 cap to be used for projects demonstrating special public benefits. Since 1986, ten projects in the dow-ntown area have utilized the Planned Community zoning that requires a finding of public benefit. Five of the projects exceeded the non-residential floor area that would other, vise 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 inlieu of providing parking. Projects Qualig,_~ing 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 up~ades. Since 1986, 65,061 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. CMR: 117:06 Page 2 Vacancy Rate for Ground Floor (GF) Combinin~ District The Ground Floor Combining District (GF) was created to encourage active pedestrian uses in the dow~towT~ 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 November 2005, there were approximately 624,330 square feet of GF area. In the staff survey of Dox,,~tov,,n vacancies in November 2005, there were 5 properties, totaling 14,390 square feet, which met the requirements for vacant and available ground floor area. They were: 529 518 540 231 432 Address Alma Bryant Bryant Hamilton University Total Vacant Square Feet 6000 2500 1790 600 3500 14,390 This results in a vacancy rate of approximately 2.30 percent; therefore, exceptions will not be permitted for consideration. CMR: 117:06 Page 3 Vacancy Rate 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 Dow~ntown cap regulations. At the time of the November 2005 staff survey, the following were vacant and available: TABLE 1: Commercial Downtown (CD) Vacant & Available Fioor Area As of October, 2005 (Includes Upper Floor Office Space) 529 335 518 540 609 732 420 203 100 167 209 231 236 285 4OO 258 159 Address Alma Bryant Bryant Bryant Cowper Emerson Florence Forest Hamilton Hamilton Hamilton Hamilton Hamilton Hamilton Hamilton High Homer Zoning District Vacant Square Feet 6,000 3,780 2,500 1,790 945 800 1,595 4,650 24,320 4,200 2,300 600 6,700 12,500 32,765 3,459 1,616 CDCGFP CDCP CDCGFP CDCGFP CDCP CDCP CDCP CDCP CDCP CDCGFP CDCGFP CDCGFP CDCP CDCGFP CDCP CDNP RT35* CD - Commercial Downtown (C) - Commercial (N)- Neighborhood (S) - Sen, ice GF - Ground Floor Combining District P - Pedestrian CX, er|ay RT - Residential Transition CMR: 117:06 Page 4 Address 212 130 245 530 101 156 432 567 560 635 Total Part of the SOFA 2 CAP Homer .... Lytton Lytton Lytton University Uniyersity University University Waverley Waverley Zoning District RT35* CDCP CDCP CDCP CDCP CDCGFP CDCGFP CDCP CDCGFP CDCP Vacant, Square Feet 3,100 4,097 17,565 24,580 7,202 8,05~ 3,500 6,000 5,320 4,370 194,310 CD - Commercial Downtown (C) - Commercial (N)- Neighborhood (S) - Sewice GF - Ground Floor Combining District P - Pedestrian Overlay RT - Residential Transition The entire CD area has approximately 3,825,000 gross square feet pf 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 194,310 square feet equals a rate of 5.80 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 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. CMR:117:06 Page 5 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 !0. Public Facilities 11. Automotive Services 12. Recreation/Private 13. Theaters 14. Warehousing & Distribution 15. Manufacturing 16. Religious Institutions 17. Multi-Family 18. Single Family.. 19. 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.) ’Rounded to the nearest 25,000 square feet) (lO/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 5O,OOO 250,000 50,000 150,000 0 150,000 3,625,000 (lO/O5) 1,250,000 625,000 225,000 200,000 175,000 100,000 15Q,000 100,000 100,000 75,000 50,000 50,000 25,000 25,000 0 50,000 375,O00 25,000 25,000 0 200,000 3,825,000 3,350,000, (10/86-10/05) 13.64% 25.00% 50.00% 0.00% 16.67% -42.86% 5O.OO% 33.33% -33.33% 50.00% -66.67% 100.00% -50.O0% -50.00% -100.00% 0.00% 50.00% -50.00% -83.00% 3,125,000 33.33% 5.52% * 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 geater 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: 117:06 Page 6 Retail Rents According to the data gathered from the November 2005 staff su~,ey of commercial real estate agents offering properties for lease in Downtown, rents for retail space are generally ranging from $3.50 to $4.75 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. Although rental rates have remained fairly stable since the last monitoring period, the high-end range rates decreased slightly from the 2004 monitoring period. Office Rents According to the data gathered from the November 2005 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 L?~on Avenues) and Class B office space (i.e. older andJor smaller buildings further from University Avenue) are ranging from $1.70 to $5.25 per square foot triple net. Office rental rates remained fairly stable since the last monitoring period. 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: Rivera, Planner DEPARTMENT HEAD REVIEW: STEVE EMSLIE Director of Planning and Community Environment CITY MANAGER APPROVAL: Assistant City Manager Architectural Review Board Palo Alto Chamber of Commerce Palo Alto Board of Realtors Downtow~ North Neighborhood Association University Park Neighborhood Association CMR:117:06 Page 7 o ATTACHMENT A DO\VNTOWN STUDY RESULTS SUMMARY (July 1986) The folloMng ,are the pfimmT measures adopted as a result of the study: A new Commercial Dox~T~town (CD) zoning district, including three subdistricts (CD-C, CD-S and CD-N), was created and applied to most of the Dou~tou~ 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 prex~ious CC ,and CS zones, limits to project size and to the overall anaount of future development, mad special developnaent regulations for sites adjacent to residential zones. Grou.~h limits were applied to the CD district restricting furore development to a total of 350,000 squ~e 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 w~ 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 invoMng 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 -950 square feet of floor m-ea. Exemptions to this requirement ,are provided for certain increases in floor area related to prox~sion of handicapped access, seismic or historic rehabilitation, one-time minor additions (200 square feet or less) and development of vacant land previously assessed for par’king. The regulations also permit, in certain instances, off-site par’king mad parking fees in lieu of on-site par’king. Perfomaance me~ures were established that specify that new development in the Downtox~a should not increase the total parking deficit beyond that expected fiom development that was existing or approved through May, 1986 (1600 spaces) and that call for re-evaluation of the parMng exemption regulations when the unmet par’king demand, resulting from exemptions, reaches one half (-9-95 parking spaces) of the minimuin 4.50 parMng spaces deemed necessaW 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 LTniversity Avenue and portions of the major side streets bem~een Lyttou and Hmnilton Avenues, in order to restrict the amount of ~ound floor area devoted to uses other than retail, eating and drinking or personal service. Page 1 o 12. 14. Staff was directed to monitor the Do~ato~a area in terms of development activity, vacancy rates, s,~es tax revenues, and commerciN lease rates to facilitate evaluation of dae effectiveness of the new regulations. St,’uq w~ directed to undertake a site m-~d feasibility study to evNuate an additionN public pmMng suuctnre elsewhere in the DOXXT~tOm~, to consider development of a par’king facility on public lots S, L and F, mad to explore the possibility of leasing or purchasing privately-omaed vac,’mt lots suitable as parking structure sites. Policies mad regulations were adopted wt~ich encourage Planned Community (PC) zoning for parMng structures and limit under~’ound parking to two levels below ~*ade, unless there is proof that recta pumping of subsurface water will not be necessary. A Twelve-Point ParMng Pro~’mn was adopted to increase the efficiency of existing parMng. Tratt~c policies were adopted which prohibit new traffic sirens on portions of :Mma Street and Middlefield Road, mad prohibit a direct .c.onnection from Sand Hill Road to Palo Alto/Alma Street. Iu addition, new si~s were approved directing through tr,~c off of University Avenue and onto Hmnilton and L,~on Avenues. Staff and the ;M-ctzitecturN Rex4ew Board (,M-IB) were directed to consider the possibili~’ of ,an Urban Desi~ Plan for Doxmtown and to develop desi~ ~idelines for commercial structnres in neighborhood transition ~e~ and for driveways which cross pedestrian walkways. A temporary Desi~a and Mnenities Committee was created m~d charged with developing an incentive pro~ana (including FAR increases of up to 1.5) to encourage private development to prox’ide a vm-iety of public mnenities in the Dox~atox~ m-ea. 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. 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