As a part of a package of changes aimed at filling retail vacancies and stimulating consumer spending in Palo Alto, the Palo Alto City Council unanimously approved zoning changes to relax restrictions on chain stores at its Nov. 19 meeting.
In the first quarter of 2024, retail vacancy rates were at about 15.1% on University Avenue and 9.6% on California Avenue. This is higher than the national vacancy rates, which are on average, around 5%.
Previously, the city restricted leases to businesses with fewer than 10 locations in California, but now, chain restaurants with fewer than 50 locations in the state will be able to establish a location in the city. Additionally, the council reduced the need for conditional use permits, which were previously required when businesses wanted to move into an area that didn’t allow a certain type of business to reside there, simplifying the permitting process across the city.
Assistant to the City Manager Steven Guagliardo, who coordinates the city’s economic development, said the goal of the zoning changes is to help revitalize commercial areas in Palo Alto.
“There’s great interest in the city in addressing vacancies in our commercial cores,” Guagliardo said. “We’re facing many of the same challenges that other cities up and down the Peninsula and across the state are facing. Retail is changing as an industry, and these changes are really designed to help keep Palo Alto competitive with other cities as a place to locate or site a new retail or retail-like business.”
Guagliardo said increasing customers in business corridors, which would equate to more consumer spending at small businesses, is a major goal of the zoning changes.
“Our hope is that allowing for a wider variety of uses will help attract a wider variety of customers and increase foot traffic, thereby increasing the economic vibrancy of our commercial cores,” Guagliardo said. “The goal here is not to adversely impact those small businesses, but rather to kind of raise the tide for everyone and just get more businesses operating.”
Michael Fechete, owner of California Avenue Hardware, said he welcomes the new regulations and the potential chain stores they may bring because California Ave’s closure to cars has reduced foot traffic and subsequently the business of stores like his.
“Chain stores are welcome,” Fechete said. “I would be happy to have more big stores around us because the small stores can thrive under the shade of the big stores. It won’t affect us negatively, and it might help to bring more shoppers.”
Still, Fechete acknowledged that small businesses play a vital role in creating a vibrant, connected and unique community.
“Small businesses bring way more variety than the chain stores,” Fechete said. “People come to us more for advice than the actual products. People want to know, ‘What kind of soil do I use in that pot? Can I put that outside or inside?’ Places like Home Depot have good people too, but the stores are too big to be able to spend time on personal connections.”
Other small business owners — such as Timi Todor Manchev, the owner of Town and Country’s Tennis Store — agree.
“We take care of our customers one by one,” Todor Manchev said. “Eighty percent of our customers are returning customers, and because of that, the customer community is growing to be our family. It’s very special to be in that position, and I don’t think any chain can offer that.”
Guagliardo said the city will closely monitor the impact of the changes on small businesses.
“We think it’s going to be something that enables a wider variety of options for smaller and local chains to potentially sit there — previously they would have had that uncertainty of a conditional use permit,” Guagliardo said. “They still have to have fewer than 50 locations in California. So when you think of real, true chains, they’re still prohibited from being able to go without a conditional use permit, but it does allow that wider variety of uses.”
Because her business is a specialty store, Todor Manchev said she doesn’t think the zoning changes will significantly affect her business.
“We increasingly, as people, are looking for more connections, and that’s something that we offer as small businesses,” Todor Manchev said. “But I’m sure some businesses will be affected because prices matter, and it’s easier for chains to have lower costs.”
