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HomeMy WebLinkAbout2001-06-04 City Council (4)City of Palo Alto City Manager’s Report TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: CITY MANAGER CMR: 241:01 DATE: SUBJECT: JUNE 4, 2001 RETAIL STRATEGY FOR THE CITY OF PALO ALTO REPORT IN BRIEF On June 8, 2000, an evaluation of retail centers for the City of Palo Alto was completed by the Sedway Group at the request of the Economic Resources Planning Program. The following eleven retail areas were examined: Alma Plaza, California Avenue Business District, Charleston Shopping Center, Edgewood Plaza, El Camino Real South commer- cial/retail corridor, Midtown Business District, Park Avenue/Lambert Street Business District, South of Forest Area, Stanford Shopping Center, Town and Country Village and University Avenue. All of the eleven areas were analyzed by the Sedway Group and were classified into four categories: blighted, transitional, mixed-use and healthy. Following the results of the study, an interdepartmental team of City staff was formed. The meetings included discussions regarding barriers to development of the retail centers, recommendations made by the consultant and City staff and the role of City staff in im- plementing recommendations. This report summarizes the findings and sets a clear path for City action. This is an in- formation report and no City Council action is required. CMR:241:01 Page 1 of 11 BACKGROUND In early 2000, the Economic Resources Planning Program (ERP) in the City Manager’s Office contracted with the Sedway Group, a real estate and urban economics finn, to study retail centers in the City of Palo Alto. The Sedway Group visited all eleven retail areas in Palo Alto and, in conjunction with ERP staff, developed criteria to assess each commercial area. The following criteria were included in the assessment: signage; physi- cal conditions; accessibility and visibility; pedestrian orientation; parking and circulation; tenant composition; and anchor tenants; vacant commercial space; vacant and underutil- ized parcels; barriers to development; characterization of the surrounding area and trends in sales tax figures. The Sedway Group provided an evaluation of the City’s retail areas and strategies for redevelopment and revitalization of identified target commercial areas. This report was provided to the Council as an information item on July 14, 2000. The following eleven areas were reviewed: Alma Plaza, California Avenue Business District, Charleston Shopping Center, Edgewood Plaza, El Camino Real South commer- cial/retail corridor, Midtown Business District, Park Avenue/Lambert Street Business District, South of Forest Area, Stanford Shopping. Center, Town and Country Village and University Avenue. A map of these areas is included as Attachment 1 of this report. All eleven of the retail areas were analyzed by the Sedway Group and were classified into four categories. The following table summarizes these findings: Category Blighted Transitional Mixed-Use Healthy Commercial/Retail Area Alma Plaza Edgewood Plaza California Avenue Business District E1 Camino Real South Commercial Corridor Midtown Business District Town & Country Village Shopping Center Park Avenue/Lambert Street South of Forest Area Charleston Shopping Center Stanford Shopping Center. University Avenue/Downtown DISCUSSION Following the analysis of the retail study, an interdepartmental team of City staff was es- tablished. They included representatives from Planning, Building, Fire, Policd and Utili- ties, and Administrative Services Department and the City Manager’s Office. This work- ing group met on a bi-weekly basis and reviewed the findings of the Sedway Group, con- CMR:241:01 Page 2 of 11 sidered ongoing projects in or near these areas, and suggested recommendations for City participation. Each of the retail districts is discussed below, along with the recommendations coming out of the working group’s discussion. The working group’s suggestions for an appropri- ate City role in supporting retail activity in each district is also included. In general, for all the retail areas, staff will continue to monitor sales tax reports and other economic in- dicators to identify further trends for further City review and action. The addition of a business license tax could be an important tool to monitor businesses in the City and as- sist in the evaluation of land use trends, economic information about businesses and em- ployee information. Blighted Commercial Areas Alma Plaza and Edgewood Plaza were identified in the study as blighted commercial ar- eas in Palo Alto. Alma Plaza Alma Plaza is a 40,000 square foot neighborhood shopping center located on Alma Street between East Meadow and E1 Verano. Albertson’s supermarket, at 17,168 square feet, is the anchor tenant and the remaining businesses are a mix of restaurant, retail and service uses. Poor physical conditions at the center, limited signage, accessibility and traffic flow are barriers to development at Alma Plaza. The center also lacks public spaces, outdoor fur- niture and landscaping. Site underutilization and long term vacancies are factors that hin- der its success. The site is functionally obsolete with major changes needed to revitalize the center. The center layout is difficult, with parking in front and a deep setback of stores that makes it easy for passing automobiles to miss the center. There are also toxic issues that need to be addressed as part of the site was a former gas station. The potential expansion of Albertson’s would be necessary to facilitate redevelopment. The working group, after considering the consultant’s report, made the following recom- mendations: ¯Facilitate negotiations between property owners, business owners and neighborhood residents to support Albertson’s appropriate expansion at Alma Plaza ¯Work with the property owner to site existing tenants and assist in the filling of other vacancies with tenants that enhance the commercial center and provide neighborhood ’ serving goods and services ¯Utilize the site more intensely and more effectively and encourage the development of the vacant parcel fronting on Alma Street ¯ ¯. Explore whether or not.toxic issues from the former gas station are a barrier to devel- opment CMR:241:01 Page 3 of 11 ¯Support the development of physical spaces that are the appropriate scale of the sur- rounding neighborhood and flexible to changing uses in the future ¯Support shared parking with adjacent parcels to meet parking requirements for small retailers City staff will continue to meet with property owners, small businesses and local resi- dents to facilitate discussions on appropriate size and scale of development at Alma Plaza. In addition, the City will encourage property owners to retain local small busi- nesses that add-to the character of this neighborhood center. Edgewood Plaza Edgewood Plaza was built in the late fifties and is located near the intersection of High- way 101 and Embarcadero Road. Currently, there is a 17,000 square foot Albertson’s su- permarket and a variety of low performing retail and service businesses. Edgewood Plaza displays signs of severe physical deterioration. The center requires physical improvements in its building structure and landscaping. The parking lot drains inadequately and suffers from many potholes. Other barriers to development include crime at the site, poor tenant mix, and multiple ownership at the center. In addition, Covenant Condition and Restrictions (CC and Rs) impact development from the original Eichler development. Despite its close proximity to a major arterial and highway, it is hidden behind a wall, trees and a gas station, which attributes to its lack of visibility. This center is zoned as a Planned Community District (PC). The working group made the following recommendations: ¯Facilitate redevelopment and revitalization of the center ¯Following redevelopment or revitalization of the center, assist in the identification of a balanced mix of commercial tenants and complementary neighborhood serving uses. ¯Improve the signage, visibility of the center (explore other options for signage as ap- propriate) ¯Support more intensive and effective use of lots ¯ ¯Explore option of mixed use on site as supported by the Comprehensive Plan ¯Identify tools such as a Redevelopment Agency to facilitate revitalizatioa~of-the cen- ter Initially, the City will assist property owners to provide more effective signage and awareness of the center. The existing Planned Community zoning at Edgewood Plaza is an effective development tool. During planning for development, a survey will be given to local residents/customers to determine market interest and potential at the center. The City will continue to. take a proactive role to explore mixed use at Edgewood Plaza and facilitate discussions with owners, tenants and neighbors. In addition, demographic in- CMR:241:01 Page 4 of 11 formation is being calculated to gauge market potential, effective market area and other factors, to-guide retail development. Transitional Commercial Retail Areas The second category for review is the centers identified as transitional commercial/retail areas. :c’l:hese include Town and Country, Midtown, California Avenue and South E1 Camino Real. Factors similar to those utilized for blighted centers are used to quantify challenges and strategies for these areas. Town and Country Village Town and Country Village is located at E1 Camino Real and Embarcadero Road. It is conveniently located near Stanford University campus~ The center consists of small retail shops in the 1000-2000 square feet range as well as cafes and restaurants. At Town and Country Village, the orientation is not pedestrian-friendly but car-friendly. There is a lack of pedestrian access for cyclists and individuals walking to the site from nearby commercial and residential areas. Physical improvements are needed to update the center. These include, at a minimum, paint, concrete walkways and updating of the as- phalt parking lot. To date, there has been reluctance on the part of the owners to invest energy and resources into physical improvement of the center and leasing available va- cant space for retail uses. Optimally, revitalization will include more important changes .such as reconfiguration of the center to a more pedestrian scale and orientation. The working group’s recommendations were: ¯Explore the use of development and other incentives to improve deteriorating physical conditions of buildings, public spaces and landscaping ¯Facilitate filling key vacant commercial spaces, particularly John’s Market ¯Encourage more intensive use of the property ¯Explore the possibility of fagade rehabilitation program The City will continue to work with the property owners to facilitate filling key vacant commercial spaces such as the former John’s Market space. The City could also consider assisting the location of a food market by negotiating office use ratios and parking re- quirements (more flexibility to meet Comprehensive Plan objectives). An active role should be played by City staff to work with the property owners to architecturally review and update the center with fagade improvements. In addition, a re-design of the parking lot and public right of way (main parking near Palo Alto Medical Facility) should also be considered. The City will continue to work x~ith the owners to discuss options for future long-range development and take advantage of future opportunities to enhance accessi- bility and visibility (e.g. walking access from Homer Street underpass). CMR:241:01 Page 5 of 11 Midtown Business District Midtown would benefit from public improvements such as landscaping on the sidewalks, medians and other forms of street beautification. There is also a disjointed development pattem in which shopping centers with parking fronting the street are mixed with build- ings fronting directly on the sidewalk. Some of the older buildings could use simple fa- cade improvements. The formation of a merchant’s association would assist in creating a unified vision of the growing Midtown district. Another challenge is the rising rents for small retail and service establishments making office uses more attractive to landlords. The working group’s recommendations include: ¯Facilitate the organization of a merchant association/business improvement district (BID) ¯Identify incentives for improvement of deteriorating fasades. ¯Facilitate the development and implementation of a vision for a unified design of the area. ¯Improve pedestrian, bicycle, and public transportation access along Middlefield Road. ¯Monitor the City Council adopted interim ordinance to ensure the diversity of retail uses and maintain the presence of the retail component of the commercial mix ¯Develop a baseline of land uses to identify and monitor trends and changes in the area City staff should take an active role in working with business owners to increase visibility and identification of businesses at Midtown through the use of devices such as gateways, a focal point, and map. The adoption of a Business Improvement District (BID) could be explored in Midtown. The City would strengthen Midtown by facilitating the develop- ment of a business association to reflect business goals, needs and strategies. Building on the Midtown parking and circulation study, when it is completed, the City could support the implementation of a plan to assist pedestrian movement throughout the business dis- trict. A marketing strategy to unify the shopping district would guide development and assist in thoughtful revitalization of the area. California Avenue Rising commercial rents are affecting this area through the loss of small locally owned businesses. In some cases, retail rents equgl offices rents. Parking in California Avenue is becoming an issue with its growing popularity. There are small, shallow lots with in- consistent zoning that hamper development. Obsolete and older buildings may make demolition and redevelopment the preferred solution drastically changing the character of this area. The working group’s recommendation include: CMR:241:01 Page 6 of 11 ¯Identify mechanisms to ensure a diversity of retail uses and maintain the presence of the retail component of the commercial mix ¯Identify strategies to support small, independent, locally-owned retailers who are at risk of being dislocated by rapidly increasing rents ~ ¯ Reevaluate zoning to support development of housing and retention of ground floor retail. ¯Evaluate zoning of complementary parcels on E1 Camino Real near California Ave- nue tobe consistent with zoning on California Avenue ¯Identify strategies to create more of a unified presence of.businesses on California Avenue ¯Explore Business Improvement District/Mainstreet concepts to enhance the area. A local Mainstreet Program focuses on four activities: organization, promotion, design and economic restructuring, all of which strengthen a commercial area. ¯Coordinate with the Planning Department to propose an interim ordinance that will require that non-conforming uses revert to conforming uses in this retail district. The City could provide Business Improvement District information (BID) to California Avenue Area Development Association and provide support for the formation of a BID if it was desired by the business district.. During the Zoning Update Ordinance, the City could explore downzoning floor area ratios on California Avenue. The City could en- courage housing and ground floor mixed use development on California Avenue as out- lined in the Comprehensive Plan. The City’s interimground floor retail ordinance will aid in the preservation of ground floor retail by requiring that uses revert to retail when a vacancy, occurs on California Avenue. Site development regulations such as height, set- backs and floor area ratio should be reviewed in this area. Traffic calming improvements on California Avenue (e.g. narrowing California Ave.) can be explored by City staff. El Camino Real South Commercial Corridor There are several factors that make development difficult on El Camino Real, such as vacant and underutilized parcels that are shallow and small; multiple ownership of con- tiguous vacant or underdeveloped parcels; and inconsistent zoning regulations. The lack of a merchant or business association as a central point of contact affects concerted ef- forts to attract private sector investment in the improvement of lighting, landscaping, pe- destrian and bicycle amenitieS. The lack of an El Camino Real Specific Plan and current design guidelines hamper coordinated development. The working group’s recommendations include: Proactively facilitate development of vacant and underutilized parcels. Develop incentives for the improvement of deteriorating facades. Improve pedestrian, bicycle, and public trans 9ortation access on the auto-dominated corridor. CMR:241:01 Page 7 of 11 ¯Identify funding to perform capital improvements such as landscaping, signage, and other street beautification elements. ¯Evaluate zoning of parcels on El Camino Real to encourage mixed use and viable re- tail nodes ¯Facilitate the organization of a merchant/business association ¯Coordinate with other efforts to beautify and enhance El Camino Real ¯Support Planning Department efforts to develop a coordinated area-plan and relevant, current design guidelines. The City will continue to participate in the development of E1 Camino Real by working with property owners, business owners and residents to develop an interim ordinance that will support and protect retail uses on the El Camino Real. In addition, neighborhood serving retail nodes should be identified to support these areas. The development of a business association and working with local businesses to become more viable are other options. Coordination with the Planning Department in the development of an E1 Camino Real Area Specific Plan and in the design guidelines for the development on E1 Camino Real would assist development. The efforts of the Palo Alto Trees for El Camino group, which is addressing beautification for El Camino Real, should also be incorporated into work plans. Facade improvements could be explored as well as developing a specific E1 Camino Real business development strategy. Mixed-Use Commercial Areas Two mixed-use areas were discussed in the Sedway study. These included the Park Ave- nue/Lambert Street District and the South of Forest Area (SOFA). Park Avenue/Lambert Street District This area was discussed by the interdepartmental team of City staff as a part of the E1 Camino Real corridor. Park Avenue/Lambert Street District is transitioning from an in- dustrial area to an employment and retail area. The E1 Camino Real portion of the area was included in the El Camino Real South Commercial Corridor study area. Fry’s Elec- tronics and a Mercedes Benz dealership are the largest retail establishments in the Park Avenue/Lambert Street District. In addition, there are a number of single family residen- tial units in the area. South of Forest Area (SOFA) The South of Forest Area is generally bounded by Alma Street, Addison Avenue and Forest Avenue. The area is a mix of former industrial uses, new office, retail and auto service uses. Large retail tenants include Ace Hardware and Whole Foods. ERP staff has coordinated efforts with the SOFA II working group. The area is in transition from light industrial to retail and office uses. Currently, twenty to twenty-five percent of the uses are retail and seventy to eighty percent are service uses. CMR:241:01 Page 8 of 11 There are run down buildings in the area and some parcels are underdeveloped. There is also some overflow of parking into surrounding neighborhoods. The working group’s recommendations include: ¯ Identify mechanisms, including development incentives (parking restrictions relaxed, if retail placed on the ground floor), to ensure a diversity of retail uses and maintain the presence of the retail component of the commercial mix (especially on the Homer Avenue corridor) ¯Identify strategies to support small, independent, locally-owned retailers which are at risk of being dislocated by rapidly increasing rents ¯Incorporate recommendations into the SOFA II Plan which will address community needs, visions Explore options such as Mainstreet Program for this area if retail is proposed on the ground floor, especially Homer Avenue corridor ¯Optimize opportunities like the Homer Avenue pedestrian underpass to site retail uses on Homer Avenue ¯Support development of the Homer Avenue tunnel as an enhancement to the visibility and access of retail in SOFA. The City can support planning and land use initiatives that support retail and service businesses in the area. In addition, the City can explore incentives such as reduced floor area ratios for the development of small independent retailers. The City will begin to collect sales tax data on the South of Forest Area to develop a baseline and monitor the positive impacts of development to the City.. Healthy Retail Commercial Areas There are three retail areas identified in the Sedway stud~ as healthy retail/commercial areas. These are Charleston Shopping Center, Stanford Shopping Center and University Avenue Downtown. While these areas are healthy and thriving, it is important to monitor their development to ensure continued success. Charleston Shopping Center Charleston Shopping Center is located on the southwest comer of Middlefield Road and Charleston Avenue. The well-situated center is adjacent to a school, community center and residential neighborhood. Barriers to viability at Charleston include the current twenty thousand square foot limit for grocery stores that limits Piazza Supermarket’s ability to expand. Other factors to consider include current trends that have resulted in sixty percent of the leasable square footage being occupied by retail uses while service establishments as a.percentage out- number retail stores in the center. This affects the neighborhood retail mix for residents. CMR:241:01 Page 9 of 11 The working group recommended: ¯Monitor the City Council-adopted Interim Ordinance that applies an 85:15 ratio of retail to neighborhood serving office use and protects ground floor retail/service uses at this center. Support minor expansions that provide better customer service and amenities to local customers ¯Adopt some flexibility in limitations for the grocery store at Charleston Center The City has taken a proactive role at the center by adopting an interim ordinance. The extension of a permanent ordinance to protect ground floor retail and neighborhood serving office uses would further strengthen its retail character. In addition, the City could work with existing businesses in exploring tenant improvements and expansions at the center. Stanford Shopping Center Stanford Shopping Center is considered to be one of the most successful regional shop- ping centers in northern California. There are not any apparent barriers to development to this successful center. - The working group’s recommendations include: ¯Encourage pedestrian connections from the Downtown and Palo Alto train station (maximize Quarry Road access from station) ¯Work with Menlo Park to support the widening of the Sand Hill Road Bridge The City should continue its positive partnership with the Center and encourage the di- versity of goods and services. Staff will continue to monitor sales tax revenues to identify retail trends at Stanford Shopping Center. University Avenue/Downtown Business District ~’ University Avenue/Downtown Business District is a successful downtown with attractive buildings and landscaping. The majority of the buildings have street level retail with residential, office or hotel space above. Approximately eighty percent of the commercial space is occupied by retail and the remaining sites are service-oriented commercial. Downtown anchor tenants include the Stanford Theater, Border’s Books and Long’s Drugs. Small businesses are also doing well, although escalating rents have put some smaller businesses at risk. Barriers to development include low retail and commercial vacancies and high rents partly due to encroaching offices in retail areas. The lack of parking for shoppers and employees affects downtown merchants. Employee retention and hiring is an issue for many downtown businesses who have difficulty keeping quali- CMR:241:01 Page 10 of 11 fled employees. There is also a perception of business owners that downtown mainte- nance should be better. The working group’s recommendations include: ¯Build approved new parking structures to mitigate downtown parking deficit ¯Use zoning ordinance update process to evaluate area for ground floor retail protec- tion ¯Consider an expansion of the ground floor retail overlay ¯Support protection of retail from office use in downtown core ¯Explore establishment of a Business Improvement District with the Chamber’s Downtown Marketing Committee ¯Provide targeted business assistance to local retailers, which couldinclude develop- ing a business strategy for specific markets or refining a marketing plan ¯Implement Interim Ordinance to address issues which may include return to con- forming uses from n0n-conforming uses when vacancy occurs in the ground floor area City staff will continue to work with downtown property owners and businesses to maintain a balance of restaurants, independent retailers, office uses and chain stores that support Palo Alto residents. City staff, in conjunction with the Palo Alto Chamber of Commerce Downtown Marketing Committee, will explore the formation of a downtown Business Improvement District to guide development and provide promotional and mar- keting support. ATTACHMENT Attachment 1 ’ Palo Alto Commercial Areas Reference Map Prepared by:~n, ~nomic Resources Planning Mirella Leong, Econom~s~rces Planning Specialist CITY MANAGERAPPROVAL: JARRISON Assistant City Manager CMR:241:01 Page 11 ofll ATTACHMENT 1 1.Stanford Shopping C~nt~r 2.University Awnue,~D~wntown 3.South of Forest Av~nu~ 4..Towa & Country Village 5.Edgewood Plaza Shopp~g Center ~.Midtown Business District " KEY TO PALO ALTO RETAIL AREAS 7. California Avenue Busihass District ’ 8. Parl~.~ab~t Busines.~ District 9. E~ Camino Real (South) Cdmmsroial Corridor I0..Alma Plaza Shopping C~nter 11. Char1~ston Shopping Cgnt~r "