Does Palo Alto have the appetite to eat its last industrial pocket?

| February 14, 2012 | 0 Comments

The City of Palo Alto is in the early stages of studying the potential redevelopment of a pocket of small industrial buildings (end of the article covers the proposal I’m referencing here) on the south corner of town- one of the last little islands of industrial properties in that city. No doubt inspired by the success of a relatively recent redevelopment in Mountain View and the tax venue that has resulted, Palo Alto planners have visions of big-box retailers and hotels on the site where dozens of small businesses now stand.

Here’s the problem- this little pocket consists of scores of small buildings on fairly tight parcels. The value of each individual site greatly exceeds the per-foot land value of even the most optimistic development project. In order to make something of substance happen here, Palo Alto would either have to subsidize a massive percentage of the purchase price of these parcels- unlikely- or take a more disturbing path.

Palo Alto has in the past changed zoning out from under industrial users, grandfathering in the established uses for as long as a few decades.  Well intentioned, I suppose, but the real impact of this is to severely curtail the value of these properties.    A similar approach was also taken by the City of Mountain View in one corner of town that essentially led to decades of blight in an industrial neighborhood and a severe loss of property value for those in the impacted area.

So, city planners essentially devalue the small properties in an area until the owners only viable option is to sell their building at wholesale prices.  It also potentially renders the buildings virtually unsellable during some stretch of the transition period (developers don’t want to hold the small parcel while they wait years for the surrounding properties to shake loose, and an owner-user won’t touch something knowing they may have to relocate at a time not of their choosing).

If the City of Palo Alto wants to encourage market-driven development in that area, that’s great.  If they attempt to use zoning changes as a weapon against small businesses, though, I hope that they encounter stiff opposition.

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