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HomeMy WebLinkAbout2004-01-20 City Council (2)City of Palo Alto City Manager’s Report TO:HONORABLE CITY COUNCIL PLANNING COMMISSION FROM:CITY MANAGER DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT DATE: SUBJECT: January 20, 2004 CMR:128:04 COMMERCIAL DOWNTOWN (CD) MONITORING REPORT FOR SEPTEMBER 1, 2002 TO AUGUST 31, 2003 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 Progams 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 September 1, 1998 through August 31, 2002 and has specific data and information for the September 1, 2002 to August 31, 2003 monitoring period. Staff regularly tracks vacancy rates, changes in floor area, and paring in the CD district resulting from approved development. Staff completed field visits for this monitoring period in October 2003. Telephone interviews were conducted thereafter and completed in November 2003 to determine current vacancy rates and prevailing rents. DISCUSSION Palo Alto’s downtown demonstrates stable economic health, with non-residential development activity increasing during this monitoring period mainly due to the 901 High Street mixed-use development. Although the vacancy rate within the first floors of Downtown commercial buildings (subject to Ground Floor [GF] Combining District regulations) showed a slight increase, the overall vacancy within the Commercial Downtown (CD) Zoning District decreased from the 2002 monitoring period. CMR: 128:04 Page 1 The rent for retail appears to be stable with no significant changes from the 2002 monitoring period. The high-end range of office rental rates shows a consistent decrease since the 2001 monitoring period. (See page 7 for further discussion). Non-Residential Development Activity The Downtown Study incorporated a gowth 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 118,993 square feet of non-residential uses have been added in the Downtown area. This includes the additional 12,063 square feet of commercial development at 901 High Street approved on December 12, 2002. No further evaluation is required at this time. The changes in non-residential square footage are shown in Attachment C. Prgiects 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 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 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. 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 1986, 60,561 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 required when the unmet parking demand resulting from exemptions reaches 225 spaces, resulting in a total deficit of 1,826 spaces. At the time of the Downtown Study, 225 represented one-half the minimum 450 parking spaces deemed necessary for construction of a new public parking structure. At the end of the current monitoring period, the City exempted a cumulative total of 236 parking spaces for projects that qualify for seismic, historic, provision of handicapped access, or one-time minor additions exemptions. Although this exceeds the 225 threshold, re-evaluation of the parking exemption regulations is not necessary at this time since the City recently opened two new parking structures, one located on 528 High Street and the other at 445 Bryant Street, effectively decreasing the original 1986 deficit by CMR: 128:04 Page 2 almost half to 836 spaces. A re-evaluation of the parking exemption regulations will be done when the unmet parking demand resulting from exemptions reaches a cumulative total of 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 two 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 geater than 5 percent. In October 2003, there were approximately 624,330 square feet of GF area. In the staff survey of downtown vacancies in October 2003, there were 9 properties, totaling 27,833 square feet, which met the requirements for vacant and available gound floor area. They were: Address 525 Alma 526 Bryant St. 539 Bryant St. 445 Emerson 151 University Ave 174 University Ave 429 University Ave 432 University Ave 552 Waverly St Total Vacant Square Feet 6400 2600 2625 2058 1200 2300 1525 4000 5125 27,833 This results in a vacancy rate of approximately 4.46 percent; therefore, exceptions will not be permitted for consideration. Vacancy Rate for Entire CD District For purposes of tracking the health of the downtown area, the vacancy rate for the entire CMR: 128:04 Page 3 CD area is reported. This figure does not affect any of the exception or Downtown cap regulations. At the time of the October 2003 staff survey, the following were vacant and available: TABLE 1" Commercial Downtown (CD) Vacant & Available Floor Area As of October, 2003 ~ncludes Upper Floor Office Space) 235 525 335 514 526 539 635 445 913 325 100 120 167 240 285 459 505 555 Address Alma Alma Bryant St. Bryant St. Bryant St. Bryant St. Bryant St. Emerson Emerson Forest Ave Hamilton Ave Hamilton Ave Hamilton Ave Hamilton Ave Hamilton Ave Hamilton Ave Hamilton Ave Hamilton Ave Address Hawthorne Zoning District CDNP CDCGFP CDCP CDCGFP CDCGFP CDCGFP CDCP CDGFP CDN2P CDC CDCP CDCP CDCGFP CDCP CDCGFP CDCP CDCP CDCP Zoning District CDNP Vacant Square Feet 5O0 6400 10348 1400 2600 2625 8608 2058 13000 2060 14213 2,750 8000 2000 2516 2675 3100 730 Vacant Square Feet 4435120 CMR: 128:04 Page 4 444 658 159 450 255 325 530 616 636 640 435 165 170 101 119 151 151 174 429 432 525 581 552 560 High Street High Street Homer Ave Kipling St. Lytton Ave Lytton Ave Lytton Ave Ramona St Ramona St Ramona St Tasso St. University Ave University Ave University Ave University Ave University Ave University Ave University Ave University Ave University Ave ............University Ave University Ave Address Waverly St Waverly St Total CDCP CDSP CDSP CDCGFP CDCP CDCP CDCP CDCP CDCP CDCP CDCP CDCGFP CDCGFP CDCP CDCGFP CDCGFP CDCGFP CDCGFP CDGFP CDGFP CDCP CDCP Zoning District CDCGFP CDCGFP 4015 10781 1616 1000 8000 3354 17674 220 4750 3045 6517 2950 3125 2073 4280 9346 1200 2300 1525 4000 8793 10027 Vacant Square Feet 5125 1500 207,234 CMR: 128:04 Page 5 The entire CD area has approximately 3,750,000 goss square feet of floor area after adjusting for the 2001-2003 projects. Of this, about 375,000 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 3,375,000 square feet. With a total 3,375,000 square feet of commercial floor area available for occupancy, the 207,234 square feet of vacancy equals a rate of 6.1 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) 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: 128:04 Page 6 TABLE 2*" Commercial Downtown (CD) Floor Area by Use Category (Rounded to the nearest 25,000 square feet) Use Category 1. Offices 2. Retail 3. Eatin.q & Drinkin.q 4. Financial Services 5. Business Services 6. Basement Storaqe 7. Hotels 8. Personal Services 9. Utility Facility 10. Public Facilities 11. Automotive Services 12. Recreation/Private 13. Theaters (10/86) 1,100,000 500,000 15O,0OO 200,000 150,000 175,000 100,000 75,000 150,000 50,000 150,000 25,000 50,000 (10/03) 1,250,000 625,000 225,000 200,000 ! 75,O00 100,000 150,000 100,000 100,000 75,000 50,000 50,000 25,000 (10/86-10/03) 13.64% 25.00% 50.00% O.0O% 16.67% -42.86% 50.OO% 33.33% -33.33% 50.00% -66.67% 100.00% -50.00% 14. Warehousing & Distribution 15. Manufacturincl 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.) 50,000 50,000 50,000 250,000 50,000 25,000 0 50,000 300,000 25,000 -50.00% -100.00% 0.00% 20.00% -50.00% 150,000 0 -100.00% 0 0 150,000 225,000 50.00% 3,625,000 3,750,000 3.45% 3,125,000 3,375,000 *The above table is rounded to the nearest 25,000 squme feet ,and ~,’as based on a table originally prepared in 1986. Over the years, because of flae rounding to 25,000 square foot increments, flae table has had a greater margin of error. Staff attempted to update the table from flae beginning in 1998; therefore flae numbers m~, not compare directly to tables prepared prior to flae 1998 report. Retail Rents According to the data gathered from the October 2003 staff survey of commercial real estate agents offering properties for lease in Downtown, rents for retail space are generally ranging from $1.50 to $6.00 per square foot triple net (NNN) (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 remained stable since the last monitoring period. CMP,: 128:04 Page 7 Office Rents According to the data gathered from the October 2003 staff survey of commercial real estate agents offering properties for lease in Downtown, rents for prime Downtown office space (i.e. newer and/or larger buildings on University Avenue and Ls~on Avenues) and secondar3, office space (i.e. older and/or sma!ler buildings further from Universit-y Avenue) are rang-ing from $2.25 to $5.75 per square foot triple net (NNN). Although the lower end of this range remained stable, the higher end decreased since the last monitoring period mainly to attract more potential tenants. ATTACHSIENTS A. Downtown Study Resuks 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: Roland Rivera, DEPARTMENT HEAD REVIEW: CITY MANAGER APPROVAL: STEVE EMSLIE EMILY~IARRISON Assistant City Manager Architectural Review Board Palo Alto Chamber of Commerce Palo Alto Board of Realtors Downtown North Neighborhood Association University Park Neighborhood Association CMR: 128:04 Page 8 ATTACHMENT A o o o 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 Commercia! (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 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 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 umnet 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 Ly~on and Hamilton Avenues, in order to restrict the amount of pound 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 re~o~ations. 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 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. 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.Staff and the Architectural Review Board (ARB) were directed to consider the possibility of an Urban Desi~on Plan for Downtown and to develop design guidelines for commercial structures in neighborhood transition areas and for driveways which cross pedestrian walk-ways. 13.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. 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