Council denies shopping center request

Town & Country Village owner’s application to allow medical-retail spaces denied for now

To give Palo Alto’s ailing retail sector a chance to recover from coronavirus pandemic lockdowns, the City Council has rejected Town & County Village’s bid to rent out space for medical services despite the owner’s worries about high vacancy rates.

The council voted 5-2 Monday on the shopping center’s application to bring in retail-oriented medical services like Botox clinic Orange Twist and boutique health care provider Carbon Health after nearly a third of its tenants shut their doors during the pandemic.

In March, when the course of the economic recovery from COVID-19 was still fuzzy, the council asked the Planning and Transportation Commission to take a second look at the shopping center’s application. The commission recommended the council adopt new rules allowing up to 10% of health retail space in the center, but preventing such businesses from facing El Camino Real or Embarcadero Road.

At Monday’s meeting, a majority of council members said they were optimistic the post-pandemic economic recovery will see retail return to Town & Country Village and they won’t have to make drastic policy changes.

The shopping center’s owner, Jim Ellis, said he was counting on the shift toward medical-retail to make up for the loss of rent from vacant spaces, noting about a dozen of such businesses have expressed interest in moving there.

Ellis said he has dropped rents 20% to 25% for tenants while the rent relief program continues.

Mayor Tom DuBois urged his council colleagues to deny the application pending the results of a retail impact study commissioned during last week’s council session.

“It doesn’t rise to a priority for me in terms of the other things we have in our work plan,” DuBois said.

Councilman Eric Filseth agreed, saying the council was “sucking up a lot of energy and staff time on this, which is a pretty small-scale impact for a lot of the other efforts we have going on. Let’s leave it the way it is for a while.”

Councilman Greer Stone said he doesn’t believe Town & County provided sufficient evidence to show its economic situation is dire. Council members asked Ellis and his company, Ellis Partners, multiple times to disclose the rents at the shopping center, but they declined.

Stone said the shopping center’s prime location — nestled between Palo Alto’s bustling downtown, Palo Alto High School, Stanford University and the Sutter Palo Alto Medical

Foundation — gives him reason to believe it will be able to recover to pre-pandemic levels.

“There’s no reason why we’re seeing high vacancy rates” at Town & Country Village, Stone said. “When this matter first came to us in March we were in a very different situation and the outlook for an economic recovery was not as good as it is now. It’s just too soon.”

Changing the center’s occupancy policy would have “opened the barn doors to things that are more medical office than health retail,” Vice Mayor Pat Burt said, expressing concern that retailers could use the city’s vague language to bring uses like urgent care facilities to the shopping center.

“We’re going to see a huge transformation in just a week,” Burt said. “Within a month or two, we will have a much better sense of what the recovery really looks like.”

But Councilman Greg Tanaka, who cast one of two dissenting votes, said allowing medical uses like orthodontists and other cosmetic therapies would increase foot traffic at the shopping center, adding that the burgeoning retail-oriented medical sector “fits into the dynamic shifts” in retail as more people shop online.

“The urgency here is that we want to be flexible,” Tanaka said. “It’s important that we enable these places to get filled and I think these retail health types of uses drive traffic. You have a captive audience.”

Councilwoman Alison Cormack, who also dissented, said traditional retailers like clothes and furniture stores have not done well in recent years and including medical uses with retail “makes sense.”

“I think having it at 10% really just is a minor experiment,” Cormack said. “I’m open to going forward for the same reason as before, which is that I’ve talked with people and they are interested in having these services available.”