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HomeMy WebLinkAbout2003-03-31 City Council (9)anager s Report TO:HONORABLE CITY COUNCIL PLANNING COMMISSION FROM:CITY MANAGER DEPARTMENT: PLANNING AND COMMUNITY ENVIRONWIENT DATE:MARCH 31, 2003 CMR:206:03 SUBJECT:COMMERCIAL DOWNTOWN (CD) MONITORING REPORT FOR SEPTEMBER 1, 2001 TO AUGUST 31, 2002 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 als9 required as a result of final 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). This report includes cumulative data from September 1, 1998 through August 31, 2001 and has specific data and information for the September 1, 2001 to August 31, 2002 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 October, 2002. Telephone interviews were conducted thereafter and completed in January 2003 to determine current vacancy rates and prevailing rents. DISCUSSION Palo Alto’s downtown reflects the downturn of the economy, with non-residential development activity declining during this monitoring period. Although the vacancy rate within the first floors of Downtown commercial buildings (subject to Ground Floor [GF] Combining District regulations) showed a slight decrease, the overall vacancy within the Commercial Downtown (CD) Zoning District showed a significant increase from the 2001 monitoring period. The rent for retail appears to be stable with no significant changes from the 2001 monitoring period. The rent for office space, on the other hand, has decreased CMR:206:03 Page 1 of 7 since the last monitoring period mainly because of higher 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 tota! 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 106,930 square feet has been added in the Downtown area; therefore, no further evaluation is required at this time. The changes in non-residential square footage are shown in 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 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 eithe} 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 !,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 this monitoring period, the City exempted a cumulative total of 236 parking spaces for projects that qualify for seismic, historic, provision of handicapped access, and 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 is in the process of completing two parking structures located on 528 High Street and 445 Bryant Street, effectively decreasing the original 1986 deficit by almost half CMR:206:03 Page 2 of 7 to 837 spaces. A re-evaluation of the parking exemption regulations will be done when the unmet parking demand results in a total of 1,062 spaces (837 current parking space deficit + 225 spaces = 1062 parking 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 It should also be noted, however, that because the CD zoning uses a blended rate of I space per 250 square feet of added floor area, the intensity of use of some buildings has increased without additional parking spaces being required. 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 2002, there were approximately 624,330 square feet of GF area. in the staff survey of downtown vacancies in October 2002, there were 8 properties, totaling 24,234 square feet, which met the requirements for vacant and available ground floor area. They were: Address 525 Alma 508 Emerson 540 Emerson 575 High St 151 University 174 University 367 University 516 University Total Vacant Square Feet 4000 1884 1850 4800 3500 2300 2500 3400 24,234 sq. ~ This results in a vacancy rate of approximately 3.88 percent; therefore, exceptions will not be permitted for consideration. CMR:206:03 Page 3 of 7 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 Downtown cap regulations. At the time of the October 2002 staff survey, the following were vacant and available: TABLE 1" Commercial Downtown (CD) Vacant & Available Floor Area As of October, 2002 (Includes Upper Floor Office Space) 235 525 955 514 505 508 532 54O 540 611 730 745 839 933 163 163 163 137 203 116 122 167 200 208 285 439 512 555 !20 148 575 Address Alma St Alma St l Alma St Bryant Ave Hamilton Emerson St Emerson St Emerson St Emerson St Emerson St Emerson St Emerson St Emerson St Emerson St Everett Ave Everett Ave Everett Ave Forest Ave Forest Ave Hamilton Ave Hamilton Ave Hamilton Ave Hamilton Ave Hamilton Ave Hamilton Ave Hamilton Ave Hamilton Ave Hamilton Ave Hawthorne Ave Hawthorne Ave High St Zone District CDNP CDCGFP CDS2P CDCGFP CDCP CDCGFP CDCGFP CDGFP CDCGFP CDCP CDSP PC CDS1P CDN2P CDN1P CDN1P CDN1P CDSP CDCP CDCP CDCP CDCGFP CDCP CDCP CDCGFP CDCP CDCP CDCP CDNP CDNP CDCGFP Vacant Square Feet 8OO 4000 1185 762 5700 1884 2240 1850 1850 6800 800 3573 1100 701 3831 3831 3831 1100 4625 2500 2009 3789 3000 1800 3150 1300 1200 800 2250 1700 4800 CMR:206:03 Page 4- of 7 654 658 159 161 431 450 421-423 127 130 181 245 255 325 480 151 165 174 367 516 579-581 424 560 Address High St High St Homer Ave Homer Ave Kipling Kipling Kipling Lytton Ave Lytton Ave Lytton Ave Lytton Ave Lytton Ave Lytton Ave _ytton Ave University Ave University Ave University Ave University Ave University Ave University Ave Waverley St Waverley St TOTAL Zoning District CDCP CDCP CDSP CDSP CDCP CDCGFP CDCP CDCP CDCP CDCP CDCP CDCP CDCP CDCP CDCGFP CDCGFP CDCGFP CDCGFP CDCGFP CDCP CDCP CDCGFP Vacant Square Feet 7568 7101 1616 1446 1200 1000 2032 2250 47250 22000 4990 11000 5000 2297 3500 2950 2300 2500 3400 10027 478 2000 222,666 The entire CD area has approximately 3,750,000 gross square feet of floor area after adjusting for the 2001-2002 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 222,666 square feet of vacancy equals a rate of 6.6 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:206:03 Page 5 of / 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. Eatinq & Drinkin_q 4. Financial Services 5. Business Services 6. Basement Storacle 7. Hotels 8. Personal Services 9. Utility Facility 10. Public Facilities 11. Automotive Services 12. Recreation/Private 13. Theaters 14. Warehousing & (10/86) 1,100,000 500,000 150,000 200,000 150,0OO 175,000 100,000 75,000 150,000 50,000 150,000 25,000 50,000 (10/02) 1,250,000 625,000 225,000 200,000 175,000 100,000 150,000 100,000 100,000 75,000 50,000 50,000 25,000 50,000 25,000 (10/86-10/02) 13.64% 25.00% 50.00% 0.00% 16.67% -42.86% 50.00% 33.33% -33.33% 50.00% -66.67% 100.00% -50.00% -50.O0%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.) 50,000 50,000 250,000 50,000 150,000 0 150,000 3,625,000 3,125,000 0 50,000 300,000 25,000 0 0 225,000 3,750,000 3,375,000 -100.00% 0.00% 20.00% -50.00% -100.00% 50 00% 3.45% " The above table is roua~ded to the ne~uTest 25,000 ;quare feet m~d was b~ed on a table ori~nMly prepared in 1986. O~er fl~e years, because of the rounding to 25,000 square foot increments, the table has had a gneater mar~n of error. Sufff attempted to update the table from the beginning in 1998; therefore flae numbers may not compme directly to tables prepared prior to the 1998 report. CMR:206:03 Page 6 of 7 Retai! Rents According to the data gathered from the October 2002 staff survey of commercial real estate agents offering properties for lease in Downtown, rents for retail space are generally ranging from $2.00 to $5.50 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. Rental rates have remained stable since the last monitoring period. Office Rents According to the data gathered from the October 2002 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 Lytton Avenues) and secondary office space (i.e. older and/or smaller buildings further from University Avenue) are ranging from $2.00 to $6.75 per square foot triple net (NNN). Rental rates have decreased since the last monitoring period mainly because of higher vacancy rates. ATTACHMENTS A. Downtown Study Results Summa?, 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: ~/STEVE E~ ~LIE Director of Planning and Community Environment CITY MANAGER APPROVAL:__ HARRISON 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:206:03 Page 7 of 7 Attachment A ATTACHMENT A DOWNTOS’VN STUDY RESULTS SUMM~RY (July 1986) The follm~4ng are the primary measures adopted as a result of the study: A new Commercial Do~town (CD) zoning district, including ll~ree subdistricts (CD-C, CD-S and CD-N), was created and applied to most of the Dm~T~town area prmdously zoned Community Conm~ercial (CC) or Ser~’ice Commercial (CS). The basic pro~4sions of the CD district include floor area ratios (KMRs) that are more restrictive than in the previous CC and CS zones, limits to project size and to the overN1 amount of future development, and speci~ development regz~lations for sites adjacent to residential zones. Gro~Ch 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 mad providing for a re-evaluation of the C15 regulations when new development reaches 23.5,000 square feet. In addition, 100,000 square feet of the total new floor area was reser~,ed for projects demonstrating special public bene~ts and 75,000 square feet for projects wlzich quali~~ 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 suuctures, seismic rehabilitation, pro~4sion of required handicapped access, or one-time additions of _900 square feet or less. New par’king regulations were established for the University Avenue Partdng Assessment District that require new non-residential development to provide parking at a rate of one space per 99.50 square feet of floor aea. Exemptions to this requirement are provided for - certain increases in floor area related to provision of handicapped access, seismic or tzistoric rehabilitation, one-time minor additions (200 square feet or less) and development of vacant land previously assessed for par "ldng. The regulations also permit, in certain instances, off-site parking and parMng fees in lieu of on-site parking. Performance measures were established that specify that new development in the Dox~atoxx~ should not increase the total par "Mng deficit beyond that expected from development that was existing or approved tt~ough May, 1986 (1600 spaces) mad that call for re-evaluation of the partdng exemption regulations when the unmet parking demand, resulting from exemptions, reaches one half (_925 parking spaces) of the minimum 450 par’king spaces deemed necessary for construction of a new public parking structure. St~f was directed to monitor the parking deficit. A new Ground Floor (GF) Combining District was created and applied to the area Nong University Avenue mad portions of the major side streets between L3cton mad Han~ilton Avenues,in order tO restrict the anaount of gound floor area dmoted to uses other llama retail, eating mad drinMng or personal smwice. Page 1 12. 14. Staff was directed to monitor the Do~tot~ area in terms of development activity, vacancy rates, s~es tax revenues, and commerci~ lease rates to facilitate evaluation of the effectiveness of the new regulations. Staff was directed to undertake a site and feasibility study to evNuate an additionN public parking structure elsewhere in the Downto~x~a, 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 tots suitable as parking structure sites. Policies and regulations were adopted Milch encourage Planned Commmfity (PC) zoning for parking structure.s and limit undergound parking to two levels below gade, unless there is proof that regular pumping of subsurface water will not be necessaIT. A Twelve-Point P~king Proaanl was adopted to increase the efficiency of existing parldng. Tr~fic policies were adopted wtzich prohibit new traffic siguNs on portions of .Mma Street mad Middlefield Road, and prohibit a direct connection from Sand Hill Road to Palo .Mto/~Mma Street. In addition, new sigus were approved directing through traffic off of University Avenue and oIatO Hanfilton and L3cton Avenues. Staff and the ~M-ctfitecmral Review Board (~M~B) were directed to consider the possibility of an Urban Design Plan for Do~ato~a and to develop desigu guidelines for commercM structures in neighborhood transition areas and for driveways which cross pedestrian w~kways. A tempormT Desigu mad ~nenities Commit-tee was created m~d charged with developing an incentive proa-mn (including F;Mt increases of up to 1.5) to encourage private developmem to provide a variety of public anmnities in the Dox~ato~a aea. 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 Commercial Downtown (CD) Zones Attachment B Attachment C on-o o~=In o 00 0 00 0 LO 0 00 (.9 rm 0 0 0 co 0 ._0 "P_ c 0 00 ÷ 00 0 0 0 0 LU c c 00 0 © 0 0 0 0 0 C 0 0 c o +÷ ÷ ÷ ÷ ÷ + ÷ 00O~ 00 o0 LO (~ 000 "~-- 0 0 _J 0O~0~ 0r7 0 0 0 00 0 0LOLO 0 0 00 ÷ 0 0 0 0 (D0 0 0 0 Attachment D 0 0 0 0 0 0 0 0 0 0 0 0 ~.0 0,r.-O~ o o "- o LD ~ 0 0 00~ ~ O~0 0 0 LO ~D 0 0 0 O~ 0 0 ~.0 0 ",’- 0 0 0 ~ ~0 I-0 0 o c o ×~ o o 0 L(") ~-~-- ~0 + + ++ + ++co ©