Council debates Village’s future

Members split on whether to allow medical storefronts

PALO ALTO >> Council members are split on whether to make the necessary zoning changes that would allow medical services inside the Town and Country Village shopping center as retailers lose big amid the pandemic.

Long a mainstay of Palo Alto High School social life and a booming commercial zone which has avoided much of the retail exodus seen in the past two decades, Town and Country Village owners say they are now in dire straits as vacancy rates reach their highest point in years.

The shopping center’s owner Jim Ellis said during Monday’s council meeting he’s reduced the rent of 40 tenants by about a third, and the vacancy rate has gone from 4% at the start of the pandemic to now 23%.

Now he’s looking to the council to make zoning changes that would allow medical services inside the outdoor shopping center, a move that ownership says would attract new tenants and stave off financial ruin.

“We’re trying to get as much flexibility to have tenancy at 100%,” Ellis said Tuesday. “Shopping centers exist on co-tenancy and folks paying multiple visits to stores. Once you start putting vacancies in between, it becomes a death spiral.”

But the council made clear it wasn’t ready to make a decision, and voted unanimously to send the matter back to the Planning and Transportation commission. Ellis said the outcome was “disappointing,” though he added

he will continue to move through the council’s hurdles to get more tenants.

Council members couldn’t decide in part because they didn’t think the shopping center’s financial position was dire enough, some contending that the outdoor mall will bounce back once Palo Alto High School and Stanford students start spending their time there again.

Mayor Tom DuBois said the council “kind of split the baby,” though he personally didn’t agree with it. He said he would prefer “retail-like” medical services — like yoga studios and salons — over dentist’s and doctor’s offices. DuBois worries that allowing medical services will increase rents and property speculation.

“Medical office is a form of office that can charge higher rents,” DuBois said. “We have a groundfloor retail protection ordinance and the idea is to really make it clear that the ground floor is for retail uses only so that rents stay at retail levels.”

DuBois said he’d like to test out medical uses in “weaker locations,” not “one of our premier retail shopping centers.” For him it just “doesn’t seem like the time or place” given how popular Town and Country Village is.

But Councilman Greg Tanaka said the shopping center’s vacancy rate and financial woes shouldn’t be ignored. Given the larger trend of retailers going under — and the likelihood that many which have left during the pandemic won’t come back — Tanaka said it’s important to fill vacancies as soon as possible.

“You can keep lowering the rent more but how much more can you lose,” Tanaka said. “What we want to be doing is putting in uses that generate traffic to that center because without that no one is going to survive. We have to find those different kinds of uses.”

He said students aren’t likely to come back to the shopping center they recognized pre-pandemic, “they’re going to go back to a bunch of vacant spaces.”

It’ll be up to the Planning and Transportation Commission to debate what kind of medical uses should be allowed in the shopping center, though some council members hope the village’s ownership is more receptive to other options.

In interviews with The Mercury News, three council members — split on what kind of medical services should be allowed at Town and Country Village — said that they would be open to considering a mixed-use revamp of the site.

In Marin County, published media reports indicate that the Northgate Mall in San Rafael will undergo massive redevelopment as it seeks to avoid the long-term death of the shopping center.

The mall’s owners are proposing to build 1,345 housing units and a town center for the Terra Linda community. The mall would be converted into a mixeduse, open-air shopping center complete with a new movie theater and new apartments.

Similar projects have also been proposed across the country.

Palo Alto Vice Mayor Pat Burt said Stanford Shopping Center has been receptive to city council discussions about adding housing to the site. Creating a Santana Row-like atmosphere in Town and Country Village could also be in the cards, Burt said.

“I remain hopeful that they would be interested in the medium and long-term in adding housing,” Burt said. “Not converting retail to housing but adding housing to the retail areas. People who live in downtown really love to have the kind of access to retail and restaurants and entertainment that you get with these kinds of developments.”

DuBois said he’d “absolutely” consider adding housing to Town and Country Village. Tanaka is also hopeful that the shopping center’s ownership will consider adding housing.

“The sense I got from them is that they’re kind of desperate to do anything,” Tanaka said. “It’s worth exploring. At this point with that kind of vacancy rate we really have to be creative here.”

Shopping center owner Ellis said he’d love to add housing if it helps Palo Alto meet its goals, but he’s hesitant to do so based on the historic appeal of Town and Country Village and residents’ reactions to redeveloping it.

“I think residents would see it as a huge threat to the historic nature of the center,” Ellis said. “We’ve worked for a long time to build what we have, and we got restrictive zoning in part to preserve this place. It’s a treasured and scared place for Palo Alto.”