Economic Development Committee backs permanent retail-vitality ordinance with narrow health-screening exception

The Palo Alto Economic Development Committee unanimously recommended the city council advance a permanent retail vitality ordinance that would codify and expand elements of an interim rule adopted in December 2024, a staff presentation and consultant briefing showed. The committee voted 3-0 to forward the measure with targeted changes and referrals.

Consultant Jeannie Iceberg told the committee the draft ordinance aims to reduce ground-floor vacancies by broadening allowable retail and retail-like uses, streamlining permit review, and adding more objective design and use standards. Key changes include three classifications for eating and drinking services (full service, limited service and bars), relaxed permit thresholds for lower-impact uses, revised parking and Transportation Demand Management (TDM) rates for downtown, and clearer rules for neighborhood-serving offices and certain medical offices that include a retail frontage component.

Public commenters, including Charlie Widance of the Palo Alto Chamber of Commerce and Ken Hayes of Hayes Group Architects, urged approval but flagged special circumstances. The Chamber endorsed the staff recommendation as a way to make Palo Alto more competitive and to reduce vacancy. Hayes supported the package but asked the city to consider additional flexibility for historic properties such as the Varsity Theater, where unusual floorplates and long rear courtyards make traditional retail leases difficult.

Several property owners and prospective tenants described how the proposed changes would unlock leases for deep or nonstandard ground-floor spaces. Peter G., who identified himself as an owner of 451 University Avenue, said a modern, nonmedical personal-service tenant (NECO Health) could occupy a long-vacant 8,000 square-foot storefront if the personal-services definition were expanded to include narrow, elective health-screening services that do not provide treatment or fulfill external medical orders. NECO’s representative, Trevor, said the company provides noninvasive visual and thermal screening and presented outcome statistics (including a stated 80% “clean” result after first scans and a small percentage of serious detections) to illustrate market demand.

Council members debated where medical or medically adjacent uses should be allowed. Members supported allowing neighborhood-serving medical offices on side streets and in many CN/CS zones, but several said they did not want to convert prime University Avenue retail frontage to pure medical-office uses. The committee directed staff to: (1) include narrow 'health screening' personal-service language similar to a public-comment proposal (packet page 64 item J), (2) modify the draft to exclude permitting pure medical offices that front University Avenue (while allowing neighborhood-serving offices off the main frontage or with retail fronting), and (3) refer further study of housing in neighborhood shopping centers and the locations and definitions for medical personal services back to the committee for additional hearings.

Chair Rectal moved the recommendation and Councilmember Lou seconded; Vice Mayor Stone, Lou and Chair Rectal voted yes. The committee’s recommendation will go to a forthcoming city council consent calendar for final action or further consideration.

The committee also requested that staff clarify any potential sales-tax impacts of retail-preservation map changes and to bring more refined language if staff tightens the public-proposed health-screening text. Staff said they would provide requested clarifications ahead of council consideration.

Next steps: The committee’s recommendation will be placed before the full city council, with the staff-drafted ordinance and the committee’s modifications and referrals attached. The draft ordinance would replace the interim ordinance before its December 2026 sunset if council adopts it.