March 28, 2006
SUBJECT: Zoning Land For Service Uses (Study Issue)
2004-0169 - City of Sunnyvale Study Issue –Study Issue to consider whether the Zoning Ordinance (Title 19) allows for sufficient opportunity for service uses in the City. Amendments to Title 19 (Zoning) may be adopted as part of the study.
REPORT IN BRIEF
There have been concerns that service uses, such as print shops, machine shops, locksmiths, auto repair and appliance repair, are easily priced out of real estate markets that are experiencing high demand for land for either office or residential developments. The reasons can be because of low density of the service use development, the age of their buildings and their location in the city. Service uses are used by both the business community and residents of the city.
In 2004 the City Council recommended a study issue to address these concerns. Its purpose was to respond to concerns raised during the office space boom period of the economy between the late 1990s and 2001 that service uses are being forced out of the city due to rapidly increasing land prices. Although this concern has diminished during the economic recession which began in 2002, the study issue identifies measures that can be taken to protect such uses as the economy rebounds.
Zoning is the City’s primary tool to regulate location and development standards for various uses throughout Sunnyvale. Therefore, the focus of this Study Issue is upon the changes that can be made to the zoning code to support and protect service uses, and the areas of the city which might be rezoned to encourage concentration of such uses.
This report includes making the determination whether the City should adopt a policy to maintain and protect service uses. Staff recommends addressing the issue by taking an existing zoning district (C-4) and amending it to make it specific for service uses. If the City Council concurs with the staff recommendation that steps should be taken through the Zoning Code to protect such uses, staff will proceed with rezoning specific areas of the City to the C-4 zoning district.
On February 27, 2006, the Planning Commission considered the Study Issue at a noticed public hearing. The Commission voted unanimously to revise the Code for the C-4 zoning district, and to initiate a rezone study for the properties listed in Attachment B.
BACKGROUND
Service Uses Described
Service uses are important to both businesses and residents because they provide the community with services used by both. Examples include print shops, contractor offices and yards, dry cleaning plants, auto repair, video and electronic repair shops. Service uses generally include those which have office space combined with storage, warehousing, light assembly and retail areas.
Service uses tend to be found on smaller sites outside the heavily trafficked areas and tend to include older or modestly styled buildings with lower rents or property values. Service businesses tend to be locally owned and/or include incubator space for newly created companies. The businesses tend to have low Floor Area Ratios (FAR) because of the need for open area for assembly, storage or equipment. The uses may include a retail area, as well as office space. Many businesses, such as auto repair, towing yards and contractors, require outdoor storage areas. Some service uses, such as auto repair, body shops and fabricators, may increase the noise level found in an area.
For these reasons, service uses tend to be more intense uses than general commercial, but not large enough, nor intense enough to be considered industrial. The fact that many service use properties are located on property with older buildings makes them attractive for redevelopment to higher valued uses, such as office space or residential. The concern is that, left unprotected, service uses could be priced out of the city, which would remove an important and well-used asset to the community.
The Zoning Code currently includes provisions to allow such uses, and this study analyzes whether the regulations properly address potential conflicts or pressures from other uses that affect opportunities for service uses. Service uses and other small businesses are vulnerable to being priced out of a property if the zoning for that property also permits uses which are able to pay higher rents or land prices.
Service Use Pressures
During the late 1990s through 2001, the market generated great demand for office buildings in Silicon Valley. In Sunnyvale, commercial and industrial sites were developed with large office buildings, while existing commercial and industrial office buildings were leased to office users who would pay high rent for their spaces. As a result, many properties with service businesses (such as auto repair, appliance repair, print shops, machine shops, etc.) were threatened to be priced out of the market because of the pressure to build additional office space, which generates higher property values.
More recently, the high demand for housing put additional pressure on the service business properties, as real estate developers continued to look for available land for new housing opportunities.
The 2003 Community Development Strategy identified, as one of 12 critical issues, the plight of service business under the pressure of rising land prices:
Small businesses are stepping stones for entrepreneurs and ethnic minorities, provide important and varied consumer products and services, and are critical links in the supply chain for larger, basic industries. As land values rise, local service businesses are being forced out or relegated to marginal and unattractive facilities.
In response, City Council adopted the following goal as part of the Community Development Strategy:
To preserve opportunity for profitable operation of those small local businesses which provide critical support services to other businesses and to our residents.
Staff prepared the attached Study Issue paper (Attachment A) to address this issue. City Council ranked the Study Issue #7 in December, 2004.
General Plan
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Land Use and Transportation Element |
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Goal R1: Protect and sustain a high quality of life in Sunnyvale by participating in coordinated land use and transportation planning in the region.
Policy R1.3: Preserve and enhance the high quality character of residential neighborhoods. Promote integrated and coordinated local land use and transportation planning.
Action Statement R1.3.2: Promote shorter commute trips and ease congestion by advocating that all communities provide housing and employment opportunities. |
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Goal C4: Sustain a strong local economy that contributes fiscal support for desired city services and provides a mix of jobs and commercial opportunities.
Policy C4.1: Maintain a diversity of commercial enterprises and industrial uses to sustain and bolster local economy.
Action Statement C4.1: Permit a variety of commercial and industrial uses.
Action Statement C4.1.2: Encourage businesses that provide a range of job opportunities |
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Legislative Management Element |
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Policy 7.3B.3 Prepare and update ordinances to reflect current community issues and concerns in compliance with State and Federal laws.
Action Statement 7.3B.3b Consider changes to ordinances to reflect changes in community standards and State and Federal laws. |
Zoning Code
Title 19 of the City of Sunnyvale’s Municipal Code includes the development standards for service uses. Service uses are allowed in both the commercial and industrial zoning districts (see Attachment D for the current Zoning Code use table).
Commercial: The Zoning Code has four Commercial Zoning Districts, where various service uses are allowed with different types of permits. The C-4 zoning district is specifically crafted for service uses:
1. The C-1 neighborhood business district is reserved for the construction, use and occupancy of commercial buildings providing retail commercial shopping and service facilities to the adjacent neighborhood residential areas.
2. The C-2 highway business district is reserved for the construction, use and occupancy of retail commercial buildings, tourist accommodations and service facilities adapted to principal highway commercial districts.
3. The C-3 regional business district is reserved for the construction, use and occupancy of commercial buildings, providing extensive retail, commercial, shopping and service facilities to serve the entire city or greater regional area.
4. The C-4 service commercial district is reserved for the construction, use and occupancy of service rather than retail facilities, such as repair shops, craft shops or custom fabricators, contractors’ offices, materials suppliers; however, it also permits office and residential uses.
Industrial: The Zoning Ordinance has two industrial zoning districts, M-S, Industrial and Service, and M-3, General Industrial. The M-S district allows service uses, as well as offices and limited manufacturing uses.
5. The M-S industrial and service district is reserved for the construction, use and occupancy of buildings and facilities for offices, research, limited manufacturing, hotels and motels, restaurants, financial uses, retail sales and services, professional services and other uses compatible with the district.
Service uses are allowed in varying forms in both the commercial and industrial zoning districts. For example, repair shops are allowed in any of the four commercial zoning areas, including areas that are more retail oriented. The C-1, C-2, and C-3 Commercial Zoning Districts also allow a variety of commercial uses beyond service uses, such as restaurants. Certain service uses, such as printers or craft shops are allowed only in the C-4 Commercial Zoning District. The C-4 Service Commercial Zoning District was crafted specifically for service users (rather than retail facilities), such as repair shops, crafts shops or custom fabricators, contractors’ offices and material suppliers.
Industrial service uses, such as warehousing, are allowed in the M-S industrial and service district and the M-3 general industrial district. The industrial districts also allow auto repair and office uses with the appropriate permits. Generally, the types of uses that create greater impacts would be allowed in the industrial zoning districts. Residential and office are potentially permitted in both the commercial and industrial zoning districts with use permits. Hotels are also permitted in the industrial zoning district with use permits. Hotels, offices and residential uses can potentially compete with service uses for space.
DISCUSSION
Existing Service Uses Locations
In general, service uses are concentrated in a few locations throughout the city. The maps listed below describe the locations with the highest concentration of service uses, and with the parameters (smaller properties, older buildings, outdoor storage areas) which service uses tend to require. These locations are candidates for rezoning to protect service uses. Service uses are also scattered throughout the city, including along El Camino Real, Fair Oaks Avenue, Wolfe Road and Mathilda Avenue, but these areas are not predominately service uses and will not likely experience large-scale conversion to that type of use.
Service Use areas (shown in Attachment B) include:
Maps 1 and 2: The western portion of Evelyn Avenue between the city limit with Mountain View and Pastoria Avenue include many service uses such as auto repair, lumber yards and light assembly businesses.
Map 3: San Lazaro and Commercial Avenues. San Lazaro Avenue includes several small multi-tenant buildings which cater to uses such as veterinarians, print shops, graphic designers and showrooms. Commercial Avenue includes auto repair, a tire store, tow yard, plumbing contractor and pool supply businesses.
Map 4: The area known as the Woods, located north of Tasman Drive between Lawrence Expressway and Birchwood Drive, has several small and multi-tenant buildings with uses such as a bindery, showrooms, catering and small manufacturing businesses.
Feedback from commercial real estate brokers
As part of the research, staff requested feedback from commercial brokers regarding this issue. The response indicated that there is currently an adequate availability of sites for these uses. Because service businesses are generally small (typically requiring 1,400 to 4,000 square feet) they tend to be located in multi-tenant buildings.
However, it was acknowledged that the current greater demand for high end retail and housing uses could decrease the amount of land available for service uses. The greatest pressure to convert properties to housing or high end retail would be for sites with larger free-standing buildings on larger parcels because of the high cost of the land and maintenance and the high vacancy rate. It was suggested that staff look into preserving commercial space along arterial streets to discourage conversion to residential use. Conversion of land to housing near service uses would also decrease the amount of land available for service uses because of restrictions that may arise from locating residents near uses that may utilize chemicals or create noise and other impacts.
Existing areas that are zoned C-4 service commercial
As discussed earlier, the C-4 zoning district is defined as Service Commercial. There are two areas that are zoned C-4. The first C-4 zoned area is located along the south side of the West Evelyn Avenue area and consists of approximately 20 properties totaling 15.21 acres. The uses in the West Evelyn area are predominantly auto related uses, such as auto repair and auto body shops. Interspersed are a few other uses, such as a dental lab, office and a residential hotel/apartment. The second area, zoned C-4/PD (Planned Development Combining District), is located on the north side of West Evelyn, east of Sunnyvale Avenue and is developed with residential uses and a commercial building.
Click here for the Evelyn C-4 Zoned Area.
Click here for the Evelyn C-4/PD Zoned Area.
Service Use Characteristics
Service uses are often found on lots that are developed with multi-tenant buildings with low floor area ratios and adequate customer parking. Because service uses do not rely on walk-in customers (like retail stores), the businesses do not need to seek areas of high pedestrian volume. Instead, they search out properties that are in less desirable locations, such as industrial areas, because the rents or purchase prices are lower. However, the locations still must be proximate to the customers they serve. Different types of service uses may desire to be closer to either the residents or the businesses that they primarily serve. Staff’s survey found that service uses serving businesses in the area interspersed with office and other industrial uses have found affordable space due to current market conditions.
Neighboring Cities Zoning for Service Uses
Staff completed a survey of Bay Area cities to analyze how those cities’ zoning regulations govern service uses. Staff has determined that there are two approaches taken by most cities:
1. One approach is to create a separate commercial service zoning district for service uses.
2. The second approach is to allow the service uses as part of other general industrial and/or commercial zoning districts.
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Cities |
Commercial Service Zoning District |
If Yes, Retail Also Allowed |
FAR Limitation |
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Cupertino |
No |
N.A. |
N.A. |
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Mtn View |
Yes |
Yes |
N.A. |
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Palo Alto |
Yes |
Yes |
25% |
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San Jose |
No |
N.A. |
N.A. |
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Santa Clara |
No |
N.A. |
N.A. |
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Sunnyvale |
Yes |
Yes |
N.A. |
The first approach of a commercial service district, as adopted by Palo Alto and Mountain View, allows a variety of commercial service uses, such as automotive care services, recycling centers, furniture repair, warehouses and printer/publishers. However, the emphasis is more on allowing commercial uses that may not be as appropriate in more pedestrian oriented areas, such as auto oriented uses. These Commercial Zoning Districts still allow other more retail type uses, such as hotels, restaurants and offices. These uses can potentially compete and push out service uses that cannot afford higher land prices. Given the more retail nature of these districts, these commercial service zoning districts are primarily located along major thoroughfares in these cities, such as El Camino Real. This is consistent with the placement of Commercial Zoning Districts in general.
The second approach adopted by cities such as San Jose, Santa Clara and Cupertino (and Sunnyvale) does not separate out service uses. Instead, they are incorporated into general commercial and industrial zoning districts. Household equipment and minor auto repair are allowed in general Commercial Zoning Districts along with other retail uses. More industrial uses, such as warehouses and heavier equipment repair are allowed in industrial zoning districts. But since the service uses are allowed with other uses, there is a greater likelihood that the typically small business owners have to compete with larger uses that can afford to pay higher land prices.
Another concern raised by allowing service uses along with other types of uses, such as hotels and retail, is bringing more people closer to negative environmental impacts generated by service uses, such as noise or use of chemicals. This concern is especially true for auto repair businesses and printers. The potential for conflict becomes greater when residential uses are allowed nearby. This conflict is partially resolved in cities like San Jose by relegating service uses that potentially generate impacts, such as auto body repair, to industrial areas. This approach limits exposure of such uses in more pedestrian oriented commercial areas; however, since such uses must compete with industrial and office uses (which can afford higher land values and rents), they could be eased out of industrial areas during a stronger economy.
Zoning Options
Below are four options to achieve the goal of preserving service uses in the Zoning Code:
1) Modify Existing C-4 Service Commercial Zoning District and Rezone Properties Targeted as Service Commercial Areas. This option would include amending the current C-4 zoning language to make it more specific to service uses (Attachment E). It could allow certain service uses as primary uses. Uses that would conflict with service uses could be prohibited (such as typical office space) and could include a lesser floor area ratio than that found in industrial zones. This option recognizes that the goal is to protect service uses. It would be necessary to rezone those properties targeted for service uses as the primary use to the C-4 zoning district. Some legal non-conforming uses may result making it harder for them to expand or rebuild.
2) Create New Service Zoning District. A new service zoning district could incorporate the factors necessary to protect and preserve the service uses of concern. The new zoning district would permit only compatible uses that generate similar demands and impacts. In addition to listing permitted, conditionally permitted and not permitted uses, the new zoning district could also contain development standards such as floor area ratio limits to minimize pressures for higher intensity uses. Staff would identify the areas appropriate for the new designation and uses. It would also be necessary to rezone those properties desired to allow service uses to the new zoning designation. Some legal non-conforming uses may result with this option as well.
3) Create New Combining District for Service Uses. The third option would be to add a combining district or overlay to areas that are already occupied by service uses or envisioned to become the service use areas of the city, if desired. Other existing uses would continue to be allowed, while the combining district would add new standards for service uses. The Combining District could: restrict the intensity of development (e.g. FAR) in underlying industrial and/or Commercial Zoning Districts; and, restrict certain incompatible uses (e.g. large retail and office uses, residential uses) in the underlying district.
4) No Action. The appropriate action may be to take no action, and to maintain the current zoning requirements and allow market forces to determine the future of service uses in the city. Current information seems to indicate there is sufficient space available for these types of uses, perhaps because the market has created the balance necessary for the community. If the economy changes, less space may be available for service uses.
Given the tendency for service uses to occupy smaller spaces, placing a floor area ratio limit such as 35% would encourage the preservation and construction of smaller one-story buildings that are affordable for and attract small businesses. Lower floor area ratios typically result in smaller building footprints and larger parking lots and lower land values. This development is the type that is attractive to service uses that tend to be more auto-oriented. It would also prevent property owners with service use tenants from redeveloping land with new and larger buildings that may drive them out because of higher land prices. The areas targeted for service uses should also be limited to smaller properties. Larger properties are desirable to attract Class A development. Smaller properties would be less desirable for such major redevelopment.
Phasing
There are two possible steps, or phases, that can be associated with the zoning options in this study. If the option of taking no action is chosen, then no changes are necessary.
Phase I- (Current Phase) Select zoning policy and identify sites to study for rezoning to new/revised zone:
This report is the first phase of the study and provides analysis to determine what general changes to the Zoning Code are needed to protect service uses in Sunnyvale. This gives the City Council the opportunity to set the policy direction for preservation of service uses.
Phase II- Rezone property:
The second phase would be a detailed analysis for those sites which have been identified for rezoning. Staff would study the specific sites identified for application of the new district or overlay and analyze the extent to which rezoning the sites would create non-conforming uses. The criteria used in selecting areas for rezoning would be based on having existing service uses, less intensely developed properties and having smaller parcel sizes. This phase would require City Council action to rezone property at a public hearing for which all affected property owners would be noticed.
ENVIRONMENTAL REVIEW
A Negative Declaration has been prepared in compliance with the California Environmental Quality Act provisions and City Guidelines. An initial study has determined that the proposed project would not create any significant environmental impacts (see Attachment C, Initial Study).
FISCAL IMPACT
No fiscal impacts other than normal fees and taxes are expected.
CONCLUSION
Service users seek out multi-tenant industrial buildings because land prices/rents are cheaper. The land use survey, response from the real estate community and the current vacancy rate indicate that there is currently sufficient land supply for service uses. However, the goal of this study is also to look at ways to preserve the ability of these users to stay in the city even when the economy is robust. Service uses often require inexpensive land. Additionally, it is also important to find areas for service uses that will not place them in close proximity to uses with large numbers of people that can cause use conflicts. Placing service uses near residential uses or retail uses will also increase potential pressure to convert these lands to similar uses. The key is to craft zoning districts and development standards that will attract the targeted uses only and exclude uses that would potentially compete with them.
Service and other similar low intensity uses provide the support needed for a broad range of businesses and residents. However, because these uses are often operated by small businesses without financial reserves to weather changes, they are especially vulnerable to fluctuations in the real estate market. Although staff’s analysis has found that there are currently adequate areas for these uses, it may be necessary to preserve and protect service users’ ability to maintain their presence in Sunnyvale as the economy fluctuates.
Changes to the Zoning Code could ensure service uses will not be pushed out by property owners who wish to convert their properties for uses that the market makes more profitable. Service uses could also be protected from pressures to move that arise from having incompatible uses, such as housing, being placed near by.
PUBLIC CONTACT
An electronic copy of the hearing notice and request for feedback was distributed via e-mail to a list of commercial real estate brokers maintained by the Economic Development Division. Staff spoke to industrial real estate brokers about service uses. Public notices for this project and the environmental document were noticed in the Sun newspaper. The Planning Commission agenda was posted on the City’s official notice bulletin board, the report and agenda were posted on the City’s web site, and the report was available at the Sunnyvale Library. A courtesy notice was also sent to the Chamber of Commerce and other interested parties. Notices will be sent to existing service-oriented businesses and possibly affected property owners of the March 21st City Council hearing.
ALTERNATIVES
1. Take two actions:
a. Introduce an ordinance (Attachment F) that modifies uses listed in the Service Commercial (C-4) Zoning District and provides a new definition for Service Commercial.
b. Initiate rezoning study for properties identified in Attachment B.
2. Modify Alternative 1 and direct staff to create a new zoning district specifically for service uses.
3. Modify Alternative 1 and direct staff to create a Combining District to protect service uses.
4. Make no changes to the current zoning structure and conclude the study.