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About this blog: I grew up in Los Angeles and moved to the area in 1963 when I started graduate school at Stanford. Nancy and I were married in 1977 and we lived for nearly 30 years in the Duveneck school area. Our children went to Paly. We moved ...  (More)

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The Retail Implications of the Comp Plan

Uploaded: Nov 4, 2017
The retail scene is changing. Online sales have led to large numbers of store closings all around the country—in affluent and less affluent areas alike. Shopping malls are adapting by replacing traditional retail outlets with a variety of restaurant, entertainment and other options.

A vibrant retail environment is a goal of the council and residents. How do the Comp Plan and related policies affect the retail environment in town?

There are some positives. The most important in my mind is the effort to develop coordinated area plans for downtown and California Avenue. Town and Country and Stanford shopping centers have the advantage of coordinated management, which leads to a planned mix of stores and other attractions. Moreover, they both have the advantage of many activities in one place.

The transportation policies in the Comp Plan address two concerns of retailers. One is that workers find it hard to get to downtown and Cal Ave. Retailers and restaurant owners report having trouble finding workers even as we raise wages. The TMA program and new funding can make it easier and cheaper for some workers to get to their jobs.

Parking or no car options for customers are also a challenge as reported in the retailer forum held earlier this fall. The Comp Plan and infrastructure plan are moving toward additional garage space, consideration of expanded shuttle service and other changes such as parking assistance apps and paid parking.

Finally, the Comp Plan envisions growing the customer base through new housing, new hotels and some expanded employment.

For retail to survive in a world of online competition, well managed shopping centers, rising wages, parking challenges, high rent in many areas needs a growing customer base with some if not many new customers with broad spending power.
The data from the city’s fiscal impact study are indicative of where the customer base is now.

--Most sales tax revenues come from visitors and businesses, not residents. In 2015 the study reports 48% of sales tax revenue came from visitor spending, 41% from local employees and business spending and 11% from local households.

If visitors and businesses and their employees are the major support for sales tax revenue, that should influence our planning and use that to build clusters that serve these customers while also giving the best chance for retail that local residents will use.

If I have one disagreement with the current approach in Palo Alto it is the idea of preserving or having retail everywhere. I think the same approach that we have for housing of clusters of activity is the best bet for increased customer support. Retailers cannot be expected to thrive or seek places where there is not a sufficient customer base. Instead of trying to maintain retail where it is not likely to be viable, I prefer an approach that builds a customer base and supports retail in clusters of activity that are more likely to attract customers.
What is it worth to you?


Posted by Eric Rosenblum, a resident of Downtown North,
on Nov 4, 2017 at 5:54 pm

Thanks for this Steve.

I think that our "ground floor retail preservation ordinance" was an extremely poorly thought-through measure.

If you talk to local retailers and ask them their principal challenges, almost across the board, they name:
1) Staff quality, retention, and cost: it is so expensive to live around Palo Alto that retailers must pay well above "market rate" to attract staff; even at the rates that they pay, they still have difficulties with quality and retention, as many staff would leave a Palo Alto job for which they have to commute an hour each way for a lower-paying job closer to home. (things like our parking permit system, by the way, are just another cost and annoyance for these staff)
2) Quality foot traffic: retail needs customers... this seems obvious, but they need the right mix of people living, working and visiting the area. Palo Alto is losing certain segments of the population (ie, the city is getting older; we have fewer young, single people), so certain kinds of retail will suffer for not having enough customers in the right demographics
3) Market forces: it's a tough environment for retail everywhere, as pressure from online stores exerts enormous price pressure
4) Location attractiveness: the retailer has to be in an attractive location. If there are empty storefronts, or too many unappealing storefronts (complaints about the numbers of banks and nail salons are common) then it is not as inviting an area to visit and shop
5) Rent: the rents in Palo Alto are high. This was never listed as the top concern. Indeed, it was rarely listed as a "top-3 concern", but it is a concern.

Our retail ordinance addresses #5 (rent) by getting property owners to continually lower rental rates until they can locate a retailer. However, it exacerbates #4 (it creates dead spaces all over town).

We definitely want retail protections for the ground floor in large swaths of our downtown areas (most of University Ave downtown area and most of Cal Ave downtown area). In peripheral areas, this ordinance is extremely destructive. Witness the buildings that have been sitting empty at the corner of Alma and Hawthorne (formerly Northface), and corner of Alma and Addison (formerly Anthropolgie). Both have sat empty for several years now, and both are seriously substandard places for retail. Both would be amazing housing sites, or mixed use housing + office sites, but we're making it really hard for them to do anything with these locations. That's harmful to those neighborhoods and to Palo Alto.

Posted by Messed Up, a resident of Downtown North,
on Nov 4, 2017 at 11:23 pm

You are so contradicting but it is clear, crystal clear. You want Palo Alto to be an office park town.

Posted by Allen Akin, a resident of Professorville,
on Nov 5, 2017 at 1:11 pm

Allen Akin is a registered user.

Since I've lived here, the downtown residential population has increased substantially due to new medium-density housing (e.g. on the old PAMF and Times-Tribune sites) and new high-density housing (e.g. at Abitare, 801 Alma, and 800 High). I'd guess the residential population is now at an all-time high.

Similarly for the working population, as new space has been built or old space converted to offices and the number of workers per square foot has increased.

So the potential customer base is likely at an all-time high, but retail is in decline. That suggests that simply "building the customer base" hasn't been enough to improve things in the past, and therefore isn't likely to improve things in the future.

Eric's more-nuanced analysis looks more convincing to me. (Minor quibble: If I remember correctly, Anthropologie moved only a year ago; at least the new store opened about this time last year. The old Addison Antiques site across the street might have been empty for more than two years, though.)

Posted by stephen levy, a resident of University South,
on Nov 5, 2017 at 1:33 pm

stephen levy is a registered user.


so to clarify you agree with Eric that the retail ordinance is poorly thought out, that there as a result are dead retail spaces outside of clusters and that these are good sites for housing or mixed use housing and office.

that is the main point as i read Eric' posts. We both agree that retail faces multiple challenges of which rent is only one.

I also agree with Eric and a side benefit is exactly building a customer base as well as good planning.

If Eric said it better than I did, I am glad to have Eric on this thread.

Posted by Allen Akin, a resident of Professorville,
on Nov 5, 2017 at 5:42 pm

Allen Akin is a registered user.

I think the retail ordinance isn't achieving its goals and I suspect it's contributing to the creation of dead spaces. I wouldn't agree that those spaces are automatically good sites for either housing or mixed-use; that's subject to larger concerns we've talked about before.

Posted by Downtown Grandma, a resident of University South,
on Nov 5, 2017 at 7:19 pm

There are several reasons that retail is struggling -- low wage workers commute long distances, online retail is gaining and not enough variety for shoppers. As the "Bricks and Mortality" event illustrated, downtown retail centers need to be creating experiences for customers so they "linger". If a city offers a variety of entertainment and retail you'll have robust tax base. If not, then it will suffer. One of the reasons Santana Row is successful is that cars are limited on the main street, there's a bit of commercial and residential there as well and they've made it an attractive place to spend the afternoon. Let's get some more residential units in both downtown and Cal Ave, be more creative with some street closures and encourage creative uses and I think we'd foster a wonderful community. I don't vilify businesses downtown -- better there than in SRP which is really transit poor -- let's be glad we have lots of commercial entities and stop vilifying any one group.

Posted by stephen levy, a resident of University South,
on Nov 5, 2017 at 7:29 pm

stephen levy is a registered user.

Thanks for clarifying, Allen.

Posted by Marie, a resident of Midtown,
on Nov 6, 2017 at 5:03 pm

Marie is a registered user.

Northface and Anthropologie were successful retail stores for many years. I suspect as in so many other cases, that what has reduced the attractiveness of these locations is increased rent, not lack of customers. Property owners have shown over and over again that they are willing to leave properties vacant for years, waiting for a compliant city council to allow them to convert to office space, rather than rent stores at a retail rate.

Given the worker/resident imbalance, I am against any changes in zoning to facilitate offices, until the this balance meets ABAG requirements. Existing zoning still allows for additional office space. There is no need to enrich developers by upzoning property for anything but affordable housing, the only thing Palo Alto really needs. There is no shortage of apartments at $5K and up. Check Craig's List. Given the existing parking deficit, I support increasing parking requirements, so that when developers are eligible for less parking than required, that a significant amount of parking is still required. Very few developments today meet current requirements due to bonuses for earthquake rehab or transferred development rights and the like.

And please do not suggest that there is, in theory, a vast number of potential renters without cars willing to pay market rates for rental housing, unless you survey existing rental property close to mass transit to see how many tenants actually have no cars. I would suggest starting with the moderate income housing project near the CA train station and the luxury condos on the other side of the station. I would be astonished if the few apartments where tenants own no cars is not exceeded by the number who have more than one car, requiring them to park extra cars on the street. Let's look at actual usage, not strange surveys with data from other states and cities.

Posted by MP Resident, a resident of Menlo Park: Downtown,
on Nov 6, 2017 at 5:12 pm

The problem with retail is too much of it is in a death spiral.

Online competition leads to trying to save costs by cutting staffing and stocking. Cutting staffing and stocking means what you want to buy isn't on the shelf, and there's no meaningful customer service that might otherwise be able to help (at least once in a while), plus tends to result in long waits for service. Customers who didn't get what they want or had to wait in a long line a few times don't bother to come back, sales continue to fall, staffing and stocking get cut again. Before you know it, the "going out of business" signs are up.

The standard old-line retail answer of "We can order it for you" is irrelevant - if it's not on the shelf, you have lost a sale to Amazon or equivalent.

If you want to see the death spiral in action, try shopping at your local Safeway.

Posted by Chris, a resident of University South,
on Nov 7, 2017 at 8:23 pm

Would somebody who thinks there is a retail deficit please provide some data on specific types of stores that Palo Alto is missing and could support?

There are 2 types of stores that seem obvious by their absence:

1) big-box stores
2) Asian markets

In the case of big-box, Palo Alto is in the process of eliminating the only one within its borders. However, just are a number of them across the city line in Mountain View and East Palo Alto.

In the case of Asian markets, it would seem to be a matter of time, but Palo Alto is emphasizing smaller grocery stores and high rents, so it may not happen in the near future.

Other than those, I'm not sure what type of retail Palo Alto is missing that would be in high demand.

Posted by Barb J, a resident of another community,
on Nov 10, 2017 at 8:36 am

I'm not entirely sure why this Palo Alto-focused discussion is here in this forum, but I'd like to add my input anyway.

First, high-density housing has flooded my short residential street with cars. I literally cannot park in front of my home anymore. People knock on my door a few times a week to ask to rent half my driveway. More housing needs to come with parking incorporated into the building.

Second, someone above mentioned that the population is aging. I have a handful of seniors on my street who have been here since the fifties, and they have no way to get to midtown or downtown or San Antonio shopping unless they can catch a ride with someone (and - yes - we offer). The shuttles run once in a while, but some of these folks can barely walk around their own homes, let alone a few blocks or a mile to a shuttle stop, and when they get there, the shuttles have steep stairs that they are unable to navigate.

So before there's any more chit-chat about retail & housing, could we please solve the vehicle traffic & parking issues? When I was a kid, I used to walk and ride my bike all over Palo Alto - and safely - but that's no longer an option for the most vulnerable among us.

Posted by PA Grandma, a resident of Community Center,
on Nov 11, 2017 at 9:53 pm

I would shop downtown if there were any shops there - other than Bell's Books, the hardware store, and Peninsula creamery to which I wanted to go. Oh, and infrequently the Bicycle store. I've even stopped taking classes at Pacific Art League. I do shop in Midtown, Town and Country (although parking isn't great there either) on California Ave, and in Los Altos, Mountain View, Menlo Park and Redwood City.Why?
- I can usually park there.
- There are stores that I can actually "shop" at for things I need.
- I can walk down the sidewalk without having to jump out of the way of "techies" to whom I am clearly invisible as they walk four abreast with their cell phones in front of their faces.

I don't like having to drive extra miles to get to stores, like University Art, that are 7 or more miles away rather than 2. Believe it or not it does add up. And I like to try my shoes etc. on before I buy them, not keep sending them back when the mail order shoes don't fit properly. Or clothes, etc.

And I'm frankly baffled as to why Palo Alto got a award for being a "Green City" when it's a destination for thousands and thousands of commuters every day, most of whom who drive.

This whole discussion makes me tired. It just gets repeated over and over again. In the final analysis it's all about "follow the money". The developers made out like bandits with the help of the PA City Council when the PACC let the developers take over the downtown and shoehorn in lots of workers with not enough parking. The landlords make out like bandits as they jack the rents up and up. Many of the businesses downtown have long time owners and fall under the Prop 13 umbrella, so they don't pay their way. The PACC is happy about the "vibrant" downtown with lots of people walking around and in the restaurants, etc., but they are not PA residents, as the data in the article indicates. We all go next door to cities which are more pleasant to be in for shopping and eating.

And talking about closing Univ Ave to traffic is about 30 - 40 years too late. It should have been done when the street was a viable shopping street. The issue then was "people won't be able to park in front of my store" and the same tired phrase is being used again. Well parking was easier 40 years ago, but I would bet dollars to doughnuts that you haven't been able to find a parking place on University Ave for years.

I think we all know what it would take to claw Palo Alto back from the domain of the landlords and developers, but I don't think we have the will to do it - a moratorium on development, serious consideration and real solutions for the retail problem (blaming it all on on-line shopping is a cop out), serious traffic management, not just"traffic calming" which diverts traffic through neighborhood, putting housing before jobs instead of after - I'm sure you all have your own list.

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