Addition to the downtown Palo Alto landscape

| May 24, 2012 | 0 Comments

It’s never a surprise to see a controversy swirling around a development project in Palo Alto, particularly in the downtown core.  The new Gateway building approved on the border of the downtown area was certainly no exception.  The Lytton Gateway project will bring a high-end, modern office building to a site that has long housed a gas station.  Given its peripheral location, maybe not a real ‘gateway’ into downtown, but it will undoubtedly be a positive addition to the landscape.   A good deal of controversy stemming from the potential traffic and parking impact on the adjacent neighborhood (certainly a justified concern– CalTrain access as a factor in choosing an office location is a pretty new development on the Peninsula.   If tech employees return to long-term patterns, parking will be an issue for this site), not to mention the city’s implementation of zoning changes that allow for significantly increased FAR.  But this site is a textbook example of transit-oriented development, suiting the local market quite nicely.

I was surprised to see the city remove the normally required residential component of the project in favor of ground floor office and retail that will be leased at below-market rate (rumor has the Chamber of Commerce taking that space), though I don’t think that adding a nominal number of units to an office development is the most organic way to bring more residents into the downtown area.

Certainly a lot less risk of a building coming out of the ground off a market cycle in downtown Palo Alto than in most places, but rents have remained flat there for several quarters, despite insanely low vacancies.  Has this market topped out, or is a lack of deal volume impeding rent growth?  This project may help answer that question.

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