Santa Cruz Avenue’s 2026 Zoning Changes: What Buyers and Owners Should Know
According to reporting by The Almanac, before Windy Hill Ventures sought approval for a nail salon or fitness studio to occupy a ground-floor storefront on Santa Cruz Avenue, it incurred city staff processing fees. Public records show Windy Hill paid at least $57,658 in staff processing fees between November 2024, when it filed the application, and the end of March 2025 alone. The city never disclosed what its staff billing rates were, or provided records past that date, so the total final cost remains unknown.
The fee records add context to the history of downtown Menlo Park's empty storefronts. The zoning rules limited which businesses could occupy some downtown storefronts. Under the city's 2012 El Camino Real/Downtown Specific Plan, an entire category of businesses that could have paid the rent and opened the doors was simply not allowed to lease the space. The landlord's application process took over a year and a half and included a public hearing process.
If you're weighing Menlo Park against another Peninsula downtown right now, compare both vacancy levels and the businesses allowed under local zoning.
Until this summer, Santa Cruz Avenue operated under tighter rules than the rest of downtown Menlo Park. Personal service businesses like spas, salons, and barbers were generally restricted to upper floors. Small-scale recreation, meaning gyms and arcades, was prohibited outright. Banks were capped, animal clinics were not permitted, and back-of-house space in many buildings sat unused as storage because converting it to office use wasn't allowed either.
On June 23, 2026, the Menlo Park City Council voted unanimously to change that, adopting a scaled-back version of what the Planning Commission had recommended a month earlier. Here's the shift in plain terms:
| Use | Before June 23, 2026 | After June 23, 2026 |
|---|---|---|
| Spas, salons, barbershops | Upper floors only | Allowed ground floor, no permit required |
| Gyms and arcades | Prohibited | Allowed with a use permit, Planning Commission review |
| Massage parlors | Prohibited downtown | Still prohibited in the downtown core |
| Banks | Already present, roughly 28,000 sq ft | Capped at 30,000 sq ft total |
| Back-of-space office conversion | Not allowed | Allowed only in limited circumstances, with public benefit fees |
Notice what didn't change. Massage parlors are still excluded. Banks got a ceiling, not a green light, since the city has roughly 28,000 square feet of financial institutions on Santa Cruz Avenue already and set the new cap at 30,000. The change was targeted rather than a blanket deregulation.
The application came from Windy Hill Ventures, a Palo Alto-based commercial investment firm, and specifically from its holding at 870 Santa Cruz Ave. Company co-founder Tod Spieker, a Menlo Park native, put the problem plainly at a Planning Commission hearing: downtown has had a retail vacancy problem for years, and building owners don't want to invest in properties they can't fill with tenants who can actually afford the rent.
The example Windy Hill pointed to was its own tenant. Luminaire, the furniture store occupying part of the 870 Santa Cruz building, wanted to stay downtown but could not afford to lease a space that large. The company needed to shrink its footprint, but the old zoning code didn't give the building owner a legal way to backfill the freed-up square footage with a spa, a fitness studio, or a service business that might actually pay competitive rent. The rear portions of many downtown buildings, Spieker told the Planning Commission, were being used for storage rather than as productive space, because converting them to office use wasn't permitted either.
According to The Almanac, Councilmember Drew Combs called the specific plan close to a complete failure at revitalizing Santa Cruz Avenue at the June 23 meeting.
The El Camino Real/Downtown Specific Plan wasn't written by people who wanted an empty downtown. It was adopted to cultivate a retail-focused streetscape, the kind of storefront-forward, pedestrian-active corridor that planners in the early 2010s believed would keep a downtown lively. The theory made sense at the time. E-commerce hadn't yet gutted small retail margins the way it eventually would, and a plan that restricted personal services and recreation to protect ground-floor retail looked like it was defending something valuable.
Fourteen years later, the businesses that could have filled those spaces, the spas and gyms and fitness studios that have become the actual growth category in small commercial retail almost everywhere, were legally locked out of the one corridor built specifically to be Menlo Park's commercial heart. Meanwhile large-format retail and traditional restaurant tenants, the only uses the plan fully welcomed, were becoming more selective about rent and square footage. The plan prioritized retail uses while restricting which other businesses could occupy some storefronts.
For a buyer comparing Menlo Park to Palo Alto, Redwood City, or Los Altos, the empty storefronts you might notice walking Santa Cruz Avenue today are not a reliable signal about the neighborhood's underlying draw. They're a snapshot of a zoning code in transition. The changes took effect immediately upon council approval, which means the legal door for spas, salons, and fitness studios to open on the ground floor is open now, as of this writing, even if the buildout and lease-up process for any individual storefront still takes time.
For anyone evaluating downtown-adjacent property as an investment, consider both vacancy levels and permitted uses. The zoning application took over a year and a half, incurred tens of thousands of dollars in city fees, and resulted in a change that retained limits, including the ban on massage parlors and the cap on bank square footage. These details describe the timing, costs, and scope of the zoning change. If you're underwriting a downtown-facing property with plans to convert its use, budget for that process, not just the permit fee schedule.
For a homebuyer or seller near downtown, the zoning change is relevant context. Storefront vacancies along Santa Cruz Avenue existed alongside rules that restricted some uses. The updated rules allow certain uses and retain limits on others. The changes followed a public process.
The zoning change is recent enough that lease-up activity on Santa Cruz Avenue is still unfolding. Watch for which of the newly eligible use types, personal services versus small-scale recreation, actually materializes first, since gyms and arcades still require individual use permits and Planning Commission approval while spas and salons do not. That distinction alone will shape how fast the corridor visibly changes over the next year.
If you're weighing a purchase near downtown Menlo Park, or you own a commercial or mixed-use property along the corridor and are wondering what the new rules mean for your building specifically, that's a conversation worth having with someone who understands both the zoning history and the underwriting math. Luxuriant Realty pairs construction and engineering-informed due diligence with boutique, hands-on guidance for exactly this kind of decision. Elevate Your Lifestyle. Request a personalized consultation.
This article is general information, not legal, tax or financial advice. Consult a qualified professional about your situation.
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