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MEMORANDUM
To: Robert Cain, Principal Planner, City of Palo Alto
From: Derek Braun, Principal
T.J. McKiernan, Associate
Date: March 24, 2026
Project: San Antonio Road Area Plan
Subject: Analyses Supporting Consideration of the Plan Alternatives: Development Conditions and Funding / Delivery Approaches for Parks and Mobility Improvements Strategic Economics evaluat ed three topics related to the City of Palo Alto’s consideration of “Plan Alternatives” for the San Antonio Road Area Plan. Those topics included the following:
1. The financial performance of housing and office development prototypes in the Plan Area that align with the Plan Alternatives’ visions (and therefore the ability of future development to fund other improvements included in the Plan Alternatives).
2. Whether the quantity and types of development described in the alternatives for the “Maxar Site” and “CTI Site” would generate sufficient parkland dedication and Parks Impact Fee revenues to construct new public parks, paseos, and outdoor spaces (collectively referred to as “parks” throughout this memorandum).
3. Tools the City of Palo Alto can use to fund and secure land for parks and for improvements included in the “Mobility Alternatives ,” given that much of the required land is currently privately owned, and significant capital improvement projects may be required.
The Plan Alternatives being considered by the City of Palo Alto include variations in the intensity and types of uses accommodated in the Plan Area. The Plan Alternatives also include varying quantities of public parks, paseos, and outdoor space to support the Plan Area’s gradual transformation into a set of cohesive mixed-use neighborhoods and employment centers. The Plan Alternatives identify the CTI Sub Area and the Maxar Site (in the North Fabian Sub Area) as being two of the most significant areas of potential change, with each consisting of approximately 25 acres of potential future development sites. New paseos in the CTI Sub Area would serve as a new pedestrian and bicycle mobility connection in addition to providing outdoor space.
The Mobility Alternatives—a sub-component of the Plan Alternatives—cover multimodal transportation improvements throughout the Plan Area, including for the key segment of San Antonio Road from Charleston Road to Middlefield Road. The Mobility Alternatives include enhanced walking and biking facilities designed to improve comfort and align with applicable safety standards . Their implementation requires varying levels of funding for construction and acquisition of easements or rights-of-way from private property owners.
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Following this introduction, the remainder of the memorandum consists of the sections described below:
• Residential and Office Development Conditions (page 2): Describes residential and office development “prototypes,” their applicability to the study geographies, and their current and potential future financial performance under varying market and development conditions. • Public Parks Costs and Funding (page 9): Defines the land use scenarios analyzed to reflect the Maxar Site and CTI Sub Area Plan Alternatives. Compares the cost to provide parks in the scenarios with the contributions of land and funding that would be generated by development in the scenarios, based on current City of Palo Alto parkland dedication and Park Impact Fee requirements.
• Park Delivery Tools (page 14): Describes tools the City of Palo Alto can potentially use to acquire land for parks in the Plan Area, depending on the magnitude and pace of development proposals.
• Mobility Alternative s Implementation Considerations (page 15): Describes challenges for delivery of each Mobility Alternative using the segment of San Antonio Road between Charleston Road and Middlefield Road as an example. Explains the major cost drivers associated with each Mobility Alternative, and identifies the pros and cons of potential funding mechanisms and land acquisition tools to implement the Mobility Alternatives.
The Appendix provides additional detailed tables that describe key assumptions, calculations, and outputs of the analyses.
Residential and Office Development Conditions
This section reviews the results of a preliminary analysis of the financial performance (from a developer’s perspective) of development prototypes representing residential and commercial developments that align with the Plan Alternatives’ visions for the Maxar Site and CTI Sub Area . The analysis examined the relative performance of the development prototypes under both current and foreseeable future market and economic conditions. The findings are intended to inform consideration of the mix and scale of uses included in the Plan Alternatives.
Residential prototypes included ownership townhomes, five -story multifamily rental housing, and eight-story multifamily rental housing (see
Figure 1). Commercial prototypes included a five-story office building and an eight -story office building (see Figure 2). The two townhome prototypes and the two office prototypes respectively occupy sites of the same size, making the key difference between these prototypes the density or floor area ratio (FAR) achieved.
The analysis determined the approximate “residual land value” associated with each prototype, which represents the developer’s ability to pay for land after addressing all other project costs and required return on investment. Expressing the findings as a residual land value provides a uniform metric for comparing the performance of different prototypes. Comparison of the residual land value to the typical value of recently sold properties in the Plan Area also indicates the relative financial feasibility of the development prototypes. Detailed assumptions and outcomes of the analyses are shown in the Appendix.
Since a variety of development challenges exist throughout the Bay Area in the current market cycle, the findings also describe how the performance of the development prototypes may change over time
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under foreseeable market and economic shifts. This step of the analysis tested the sensitivity of the results to potential changes in rents and cap rates, a variable that represents a project’s net operating income relative to its value and serves as an in dicator of the strength and perceived risk of the development market. such as construction costs or land costs, that are also always changing over time. In reality, every aspect of the development “equation” changes over time, such as variation in construction costs, financing costs, and land costs. Nonetheless, the results do demonstrate the potential outcomes of improving market and economic conditions over the next two- to three-year period.
F
IGURE 1: RESIDENTIAL DEVELOPMENT PROTOTYPES
3-Story
Townhomes
(Garage
Parking)
3-Story
Townhomes
(Podium
Parking)
5-Story
Multifamily
8-Story
Multifamily
Site/Building Characteristics
Tenure Ownership Ownership Rental Rental
Parcel Size (acres) 12.5 12.5 1.5 2.5
Parcel Size (SF) 544,500 544,500 65,000 110,000 Number of Units 250 350 140 320 Number of Market-Rate Units 200 280 140 320 Number of Affordable Units 50 70 Average Unit Floor Area 1,700 1,700 850 850 Number of Stories 3 3 5 8 Units per Acre 20 28 94 127
Parking Spaces 500 753 210 400
Private Garage 500
Podium 753 105 400
Underground 105
Source: Raimi+Associates, 2026; Strategic Economics, 2026.
FIGURE 2: OFFICE DEVELOPMENT PROTOTYPES
Five-Story Office Eight-Story Office
Site/Building Characteristics
Parcel Size (acres) 2.2 2.2
Parcel Size (SF) 95,300 95,300
Number of Stories 5 8
FAR (without parking) 1.76 2.70
Gross area (GSF) 168,000 268,800
Parking Spaces 516 726
Structured Garage 420 630
Underground 96 96
Parking Ratio (per 1,000 SF) 3.07 2.70
Source: Raimi+Associates, 2026; Strategic Economics, 2026.
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As shown in Figure 3, townhome-style developments support the highest residual land values of the four residential development prototypes under current conditions. Under current market conditions, the townhome projects both result in residual land values of $311 and $226 per square foot of land.
Under current development conditions, typical garage-parked townhomes support higher residual land values than the less common podium-parked townhomes that were also analyzed (a version of which exists at “Altaire” in the Plan Area). The parking podium in the latter prototype increases the achievable density of townhome -style housing on the site, but the additional value of those housing units is insufficient to cover the increase in construction costs for building the concrete podium.
The feasibility analysis found that the multifamily rental prototypes currently support lower residual land values than townhomes. The five-story multifamily prototype produced a slightly negative residual land value, likely due to the prototype’s inclusion of a level of underground parking. The eight -story multifamily building, which did not contain any underground parking, supporte d higher residual land values than the five -story multifamily building, but it still did not perform as well as either of the townhome prototypes.
The short -term financial performance challenges for the multifamily rental housing prototypes are largely the result of increased construction costs and financing costs , both of which are negatively impacting midrise housing development throughout the Bay Area. Multifamily residential development slowed in the years after the Covid -19 pandemic as rents failed to keep pace with rapidly rising construction costs. The effects of these changes remain in place, as high construction costs and financing costs continue to pose challenges for delivering new multifamily projects.
Despite short-term financial performance challenges for midrise multifamily rental housing, testing of market scenarios demonstrates that modest improvements in development conditions would likely readily enable development of these prototypes in the near future in the Plan Area. • The market scenarios compared current and improved cap rates under assumptions of varying levels of rent growth. The high end of the range of market outcomes achievable in the next two to three years was based on a 3.75 percent cap rate and twenty percent increase in rents. The low-end scenario was based on the current estimated cap rate of 5.50 percent and no rent growth. Figure 4 and Figure 5 show all outcomes in the range of rent and cap rate growth, with the bottom left corner of the shaded area representing residual land values under current conditions.
• The five -story and eight -story multifamily rental prototypes produce residual land values sufficient to purchase and develop land in the Plan Area with a ten percent increase in rents and marginal decrease in cap rates. The eight-story multifamily prototype outperforms the five- story prototype, likely due to the former’s less costly parking configuration.
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FIGURE 3: RESIDUAL LAND VALUE OF RESIDENTIAL PROTOTYPES UNDER CURRENT MARKET CONDITIONS
Source: Strategic Economics, 2026.
FIGURE 4: RESIDUAL LAND VALUE OF THE FIVE-STORY MULTIFAMILY PROTOTYPE UNDER A RANGE OF MARKET
CONDITIONS
Source: Strategic Economics, 2026.
$311
$226
$(80)
$17
-$200
-$100
$0
$100
$200
$300
$400
$500
3-Story
Townhomes
(Garage Parking)
3-Story
Townhomes
(Podium
Parking)
5-Story
Multifamily
8-Story
Multifamily
Land Values ($ per Square Foot)
Typical Land Values Residual Land Value
-$400.00
-$300.00
-$200.00
-$100.00
$0.00
$100.00
$200.00
$300.00
$400.00
$500.00
0% 10% 20%
Residual Land Values per Square Foot
Change in Market Rents
Typical Land Values in Palo Alto
Range of Residual Land Values
Residual Land Value (Improved
Cap Rates)
Residual Land Value (Current
Cap Rates)
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FIGURE 5: RESIDUAL LAND VALUE OF THE EIGHT-STORY MULTIFAMILY RENTAL PROTOTYPE UNDER A RANGE OF MARKET
CONDITIONS
Source: Strategic Economics, 2026.
The office development prototypes also demonstrate challenges for their financial performance under short-term market conditions, due to similar broader regional factors . As shown in Figure 6, neither office prototype currently achieves a positive residual land value due to similar factors that are constraining the short-term performance of the midrise residential development prototypes. In recent years, market rents for many types of commercial property have fallen or plateaued, while construction costs and interest rates have risen significantly. As a result, developers and investors are approaching office development with a higher level of uncertainty than in the recent past, and they require higher return thresholds for new projects to achieve financial feasibility.
Despite short-term constraints for office development, Palo Alto and nearby Silicon Valley communities remain highly-desirable office markets —especially for modern class A office buildings in mixed-use districts with amenities. New development proposals—such as Presidio Bay’s proposed redevelopment of Charleston Plaza shopping center adjacent to the Plan Area —demonstrate ongoing developer confidence that office development conditions will improve. This is especially true for new, modern office projects in l ocations with amenities and housing. The financial analysis described in this memorandum is based on current conditions in which the Plan Area is a secondary office market compared to “core” locations such as Downtown Palo Alto, California Avenue, and near Stanford Research Park.
1 However, a large-scale mixed-use office development in the Plan Area can potentially transform the Plan Area’s market position, improve the area’s ability to command higher office rents, and reduce perceptions of development risk.
1 These findings generally align with a recent analysis by Economic & Planning Systems, Inc. for the City of Palo Alto’s consideration of policy options to encourage multi -family development in mixed -use districts. Although that analysis incorporated slightly more optimistic base assumptions, the analysis found significant differences in the financial performance of office development prototypes between the highest- value submarket areas within the city versus other areas of the city. See the staff report and attachments for Action Item #2 from the March 10, 2026 meeting of the Policy and Services Committee of the City of Palo Alto. -$400.00
-$200.00
$0.00
$200.00
$400.00
$600.00
$800.00
0% 10% 20%
Residual Land Values per Square Foot
Change in Market Rents
Typical Land Values in Palo Alto
Range of Residual Land Values
Residual Land Value (Improved
Cap Rates)
Residual Land Value (Current Cap
Rates)
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Testing of market scenarios again demonstrates that modest improvements in development conditions would likely enable development of the office prototypes in the near future in the Plan Area. • The tested market scenarios compared current market rents to rents up to twenty percent higher under “strong” market cap rates of 4.50 percent and “weak” market cap rates of 7.75 percent (derived from market research and developer interviews). These ranges reflect historic rent growth and the variability of market capitalization rates over the last ten years. Figure 7 and Figure 8 illustrate the performance of both prototypes under a range of possible future development market conditions.
• The financial performance of the office development prototypes most readily improves in response to changes in financing costs and perceived development risk . Typical cap rates adjust in response to changes in financing costs, perceived development risk, and anticipated future revenues. The market scenario analyses show that the office prototypes exceed land purchase costs under a hypothetical “strong” market c ap rate scenario while maintaining current rents and construction costs.
• The results of the analysis also demonstrate the value of additional office FAR in the eight - story office prototype —suggesting greater ability of higher -FAR office products to support community benefits or other contributions. For example, in a strong market scenario (low cap rates) with ten percent rent growth, the five -story prototype’s residual land value is approximately $580 per square foot of land and the eight-story prototype’s residual land value is approximately $1,060 per square foot of land.
FIGURE 6: RESIDUAL LAND VALUES OF COMMERCIAL PROTOTYPES UNDER CURRENT MARKET CONDITIONS
Source: Strategic Economics, 2026.
$(110)
$(42)
-$150
-$100
-$50
$0
$50
$100
$150
$200
$250
$300
Five-Story Office Eight-Story Office
Land Values ($ per Square Foot)
Typical Land Values Residual Land Value
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FIGURE 7: RESIDUAL LAND VALUE OF THE FIVE-STORY OFFICE PROTOTYPE UNDER A RANGE OF MARKET CONDITIONS
Source: Strategic Economics, 2026.
FIGURE 8: RESIDUAL LAND VALUE OF THE EIGHT-STORY OFFICE PROTOTYPE UNDER A RANGE OF MARKET CONDITIONS
Source: Strategic Economics, 2026.
-$500.00
-$300.00
-$100.00
$100.00
$300.00
$500.00
$700.00
0% 10% 20%
Residual Land Values per Square
Foot
Change in Market Rents
Typical Land Values in Palo Alto
Range of Residual Land Values
Residual Land Value (Strong
Market)
Residual Land Value (Weak
Market)
-$200.00
$0.00
$200.00
$400.00
$600.00
$800.00
$1,000.00
$1,200.00
$1,400.00
0% 10% 20%
Residual Land Values per Square Foot
Change in Market Rents
Typical Land Values in Palo Alto
Range of Residual Land Values
Residual Land Value (Improved
Cap Rates)
Residual Land Value (Current Cap
Rates)
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Public Parks Costs and Funding
The following findings c ompare the cost s and potential development -driven public revenues to construct parks (inclusive of paseos and outdoor space) at the Maxar Site and CTI Sub Area. The following content describes development scenarios analyzed for those areas, approximate development costs to build parks included in the Plan Alternatives for those areas, and estimates potential resources for park acquisition and construction that would be supported by new development in the Plan Alternatives.
STUDY GEOGRAPHIES AND DEVELOPMENT SCENARIOS
Development scenarios for the Maxar Site and CTI Sub Area were prepared based on Plan Alternative buildout information provided by Raimi + Associates. The scenarios are not indicative of active planning applications in the City of Palo Alto. They are preliminary buildout scenarios used to evaluate the feasibility of park development in each subarea.
The Plan Alternatives included 2 to 4.5 acres of park space at the Maxar Site and one to three acres at the CTI Sub Area. Figure 9 shows the quantities of park space included in each scenario to determine park land costs and funding contributions. Numbers in the scenario names vary based on park space in the scenarios, while letters in the scenario names vary based on differences in development composition.
This analysis only evaluated residential development scenarios at the Maxar Site, although the site could include a smaller commercial component. The scenarios for the Maxar Site, which is a large single-owner parcel, include a mix of townhomes and multifamily housing units. All analyses assumed that townhomes are an ownership housing product while multifamily apartments are a rental housing product.
The CTI Sub Area includes two scenarios of entirely residential development and two scenarios of residential and office development.
F
IGURE 9: DEVELOPMENT SCENARIOS BY GEOGRAPHY AND PARK SPACE Park Area (Acres) Townhome Units Multifamily Units Office Square Feet Maxar Site
Scenario 1A 2.0 260 720 0
Scenario 1B 2.0 175 1,295 0
Scenario 2A 4.5 200 780 0
Scenario 2B 4.5 115 1,355 0
CTI Sub Area
Scenario 3A 1.0 0 1,344 0
Scenario 3B 1.0 0 1,728 0
Scenario 3C 1.0 0 1,428 675,000
Scenario 3D 1.0 0 2,000 825,000
Scenario 4A 3.0 0 1,156 0
Scenario 4B 3.0 0 1,472 0
Scenario 4C 3.0 0 1,172 675,000
Scenario 4D 3.0 0 1,500 825,000
Source: Raimi + Associates, 2026; Strategic Economics, 2026.
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PARK DEVELOPMENT COSTS AND POTENTIAL FUNDING ASSOCIATED WITH LOCAL
DEVELOPMENT ACTIVITY
The following findings examine whether the City of Palo Alto’s existing park land dedication and funding requirements would cover the costs of providing parks included in the Plan Alternatives. The findings describe costs to provide parks in the Scenarios, identify required park land and funding contributions from development in the Scenarios, and discuss the adequacy of current parks funding mechanisms.
The analysis used park construction cost estimates (based on the City of Palo Alto’s most recent Park Impact Fee nexus study), recent property sales, and a construction cost inflation index to calculate the cost of land acquisition and park construction on the Maxar site and in the CTI subarea.
The estimated cost to acquire park land and construct a park in the Plan Area ranges from $11.5 million to $13.4 million per acre, as shown in Figure 10. The notes below Figure 2 describe the sources and methodology used to prepare these estimates.
Based on these cost estimates, estimated park development costs at the Maxar Site range from $23 million to $60 million and estimated park development costs in the CTI subarea range from $11.5 million to $40 million. As shown in Figure 11, these cost estimates reflect the low- and high-end park development cost estimates as applied to the varying quantities of park acres included in the Land Use Alternative and Development Scenarios.
Actual park development costs will vary depending on the specific circumstances of land acquisitions, park design, and changes in general costs for labor and materials. The estimates described in this memo are intended to inform general policy-level consideration of mechanisms for funding parks included in the Plan Alternatives. Although these estimates are based on reliable local sources and data, t he actual cost to acquire land and construct a park will always vary based on unique circumstances.
FIGURE 10: PARK DEVELOPMENT COST ESTIMATES (2026 DOLLARS) Cost per Acre Low-End Cost Estimate (b) High-End Cost Estimate (c) Land Acquisition $9,300,000 $11,000,000
Park Construction (a) $2,138,000 $2,138,000
Planning and Design $128,000 $128,000
Administration $107,000 $107,000
Total Cost / Acre $11,537,000 $13,373,000
(a) Strategic Economics assumes outdoor space will be developed as "City Parks" and plazas, not as "Natural Open Space," which has a lower development cost per acre.
(b) Strategic Economics calculated the low-end park development cost by adjusting the City's previous park development cost estimates (from 2019) for inflation. The adjustment was based on the California Construction Cost Index (published by the California Department of General Services and based on the Engineering News Record Building Cost Index). Although this index reflects changing construction costs, it is also used to increase the City’s park impact fees. As such, it is appropriate to use this index to conduct a fee-based estimation of the total cost of park development. The original estimates appear in the City of Palo Alto’s “Supplement to the Development Impact Fee Justification Study,” 2019.
(c) Strategic Economics calculated the high-end total outdoor space development cost based on land values reflecting the average of five industrial property sales that occurred in the San Antonio Road Specific Plan Area from 2024 to 2026 (these sales are shown in Figure 14; all other costs reflect inflation-adjusted costs from the City of Palo Alto’s 2019 park development cost estimates described above.
Source: City of Palo Alto, 2019 & 2022; DTA, 2019 & 2022; California Construction Cost Index, 2021 & 2026; Strategic Economics, 2026.
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FIGURE 11: ESTIMATED PARK LAND ACQUISITION/CONTRIBUTION VALUE AND PARK DEVELOPMENT COST FOR THE
MAXAR SITE AND CTI SUB AREA
Maxar Site CTI Subarea
Scenarios Scenario #1 Scenario #2 Scenario #3 Scenario #4 Total Sub-Area Acreage 24.5 24.5 25.8 25.8
Park Area (Acres) (a) 2.0 4.5 1.0 3.0
Park Development Cost / Acre
Low-End Estimate $11,537,000 $11,537,000
High-End Estimate $13,373,000 $13,373,000
Total Park Development Cost
Low-End Estimate $23,074,000 $51,916,500 $11,537,000 $34,611,000 High-End Estimate $26,746,000 $60,178,500 $13,373,000 $40,119,000 (a) The Park Area of each alternative includes a mix of park space, plazas, and pedestrian walkways / paseos. The cost estimates uniformly assume that the overall average cost of these spaces match the typical cost of developing a park in Palo Alto.
The next step of the analysis compared the estimated park development costs to the total developer contributions to park space and funding required under current City of Palo Alto requirements . The main assumptions of each buildout scenario were shown in Figure 9.
The City’s two policies that generate funding and produce land for parks are the Parkland Dedication requirement and the Park Impact Fee:
• The Parkland Dedication requirement only applies to residential projects that require a subdivision or parcel map, which typically includes multiunit ownership housing developments such as single -family homes, townhomes, and condominiums. Therefore, the requirement applies to the ownership townhome component of the Maxar site’s development scenarios. As of 2025, t he Parkland Dedication requirement specifies that subdivisions resulting in more than 50 parcels must provide land at a rate of 531 square feet per unit for single family homes and 366 square feet per unit for multi-family homes; otherwise, an in-lieu fee may be paid.
• The Park Impact Fee requires that multifamily developments pay $44.20 per square foot and commercial projects pay $19,076.43 per 1,000 square feet, as of August 2025. The Park Impact Fee only applies to projects not subject to the Parkland Dedication requirement. For purposes of the analysis, the multifamily housing units at the Maxar Site and CTI Sub Area were assumed to be rental projects that must pay the Park Impact Fee.
At the Maxar site, the development scenarios with two acres of parks provide sufficient parkland dedication and funding for those parks; in contrast, the development scenarios with 4.5 acres of parks fall short of providing sufficient land and funding for those parks under existing requirements. Figure 12 compares the cost of providing parks in the scenarios (based on land value and park construction cost) versus the value of land dedication and Park Impact Fee payments required of development in the scenarios. As shown, the land and fee contributions in the scenarios with 4.5 acres of parks fall short of meeting the full cost of developing the parks. The results for all scenarios assumed that the new housing development is exempt from paying approximately $13.5 million in park impact fees due to credits for existing commercial development on the site.
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FIGURE 12: TOTAL MAXAR SITE PARK DEVELOPMENT COST AND REQUIRED DEVELOPER CONTRIBUTIONS UNDER
EXISTING CITY POLICIES
(a) The development scenarios under the two-acre park alternative are required to dedicate 3.2 and 2.1 acres of park space, respectively, given that the 260 and 175 townhomes in these scenarios must dedicate 531 square feet of park space each. Under the Parkland Dedication policy, they would pay an in -lieu fee for the remaining undedicated park acreage; however, this chart assumes that the two-acre park contribution fully satisfies the dedication requirement, and no additional in -lieu fee revenue is show n (i.e., only the Park Impact Fee contributions are shown).
Source: City of Palo Alto, 2025; Strategic Economics, 2026.
At the CTI Sub Area, Park Impact Fees exceed total development costs in every scenario except the one with the lowest housing density. As shown in Figure 13, the Park Impact Fees generated under the one-acre park alternative scenarios for the CTI Sub Area are at least three times higher than the park development cost due to the small park size compared to the total housing units developed. The three-acre park alternative scenarios include fewer housing units, decreasing the total Park Impact Fees collected compared to the one-acre alternative while also requiring three times the cost in land acquisition and construction to build the park. However, the only CTI Sub Area scenario for which Park Impact Fees are inadequate to cover the cost of park development is the least intensive “Scenario 4A,” which includes the lowest number of housing units —implicitly corresponding to five -story multifamily residential development—and three acres of parks and paseos.
The analysis findings demonstrate that relatively higher-intensity development is better able to provide land and funding to construct the parks envisioned in the Plan Alternatives. The scenarios that fail to meet park land and funding requirements combine fewer housing units with higher assumed quantities of park land.
$0M $20M $40M $60M $80M
Total Park Development Cost
Scenario 1A Development Contributions
Scenario 1B Development Contributions
Total Park Development Cost
Scenario 2A Development Contributions
Scenario 2B Development Contributions
Total Cost of Park Construction or Existing City Policies Land Cost (Acquisition) Construction Cost Land Cost (Dedication) Park Impact Fee (Residential) Scenario #1 - 2.0 Acre Park
Scenario #2 - 4.5 Acre Park
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FIGURE 13: TOTAL CTI SUB AREA PARK DEVELOPMENT COST AND REQUIRED DEVELOPER CONTRIBUTIONS UNDER
EXISTING CITY POLICIES
(a) The development scenarios for the CTI subarea are not bound to the Parkland Dedication requirements.
Source: City of Palo Alto, 2025; Strategic Economics, 2026.
Park Delivery Tools
Although future development in the Plan Area will generate funding to build parks, funding alone does not guarantee that the City of Palo Alto will be able to acquire land for parks envisioned in the Plan Alternatives. The Parkland Dedication requirement is the sole tool that ensures development projects provide land for parks, but the requirement only applies to a very limited subset of large-scale, typically owner-occupied housing development projects. However, these projects can currently request to pay an in-lieu fee instead of providing the on-site land dedication.
The following findings describe several significant tools available to the City of Palo Alto for ensuring or enhancing the ability of the City to obtain land for parks and other public facilities needs included in the Plan Alternatives. The applicability of each tool varies depending on the development context , such as whether new development is undertaken by a single large property owner or through smaller individual projects via an incremental process.
A detailed funding and financing strategy for a ll major p ublic infrastructure and facilities needs will later be prepared and included in the San Antonio Road Area Plan.
As described earlier, the City’s two policies that solely focus on generating funding and dedicating land for parks are the Parkland Dedication requirement and the Park Impact Fee:
$0M $20M $40M $60M $80M $100M
Total Park Development Cost
Scenario 3A Development Contributions
Scenario 3B Development Contributions
Scenario 3C Development Contributions
Scenario 3D Development Contributions
Total Park Development Cost
Scenario 4A Development Contributions
Scenario 4B Development Contributions
Scenario 4C Development Contributions
Scenario 4D Development Contributions
Total Cost of Park Construction or Existing City Policies Land Cost (Acquisition) Construction Cost
Park Impact Fee (Residential) Park Impact Fee (Commercial) Scenario #4 - 3.0 Acre Park
Scenario #3 - 1.0 Acre Park
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• Existing Parkland Dedication requirement: The City of Palo Alto’s existing dedication requirement mandates that housing developments seeking a subdivision or parcel map for more than 50 parcels must provide land for parks. Smaller projects requiring subdivision or a parcel map can pay an in-lieu fee instead. This requirement would primarily apply to large-scale ownership housing projects, such as the townhomes envisioned at a portion of the Maxar site in the plan alternatives.
• Park Impact Fees: The City’s Park Impact Fees, described earlier, specifically provide funding for new parks. These fee revenues can be used to acquire land for public parks, but do not guarantee the City’s ability to acquire any specific property.
The City of Palo Alto can also establish an enhanced infrastructure financing district (EIFD) to use growth in property tax revenue to fund parks and other capital improvements—although this tool diverts tax revenue that would otherwise accrue to the City’s General Fund. An EIFD is a tool that diverts growth in municipal General Fund property tax revenues (the “tax increment”) from within a district to help fund infrastructure projects. The tool only indirectly leverages new development activity to pay for improvements since an EIFD diverts revenues that would otherwise support the City’s General Fund—the City’s primary operating fund. However, an EIFD enables the City to bond against future tax increment revenue to immediately construct improvements that may accelerate development and therefore growth of overall tax revenue.
Larger development projects create unique opportunities to ensure parks are delivered through both project-specific and district-based mechanisms. Examples of these mechanisms include the following:
• Development Agreements: Development agreements could potentially be required in the Area Plan for large-scale projects pursued by a master developer that exceed certain size thresholds. Negotiated agreements create an opportunity to require parkland dedication and construction, potentially in lieu of otherwise applicable Park Impact Fees. This option may be preferable for the City than using existing policies as it allows greater flexibility to specify park requirements and it addresses park dedication requirements, which will likely not apply to the CTI subarea under the Plan Alternatives development scenarios.
• Community Facilities Districts (CFDs): CFDs create an additional tax levy on properties in a district. These funds can be used to provide infrastructure improvements within the same district via bond issuance and repayment over time. Under California state law, this levy can be calculated based on any type of reasonable property characteristic other than property value, such as land square footage. The process for initiating the CFD could be initiated by the City but would require a two-thirds vote of property owners by land area if there are fewer than 12 registered voters in the district—an easier threshold to meet in a nonresidential area with one or more interested large property owners. A key benefit of CFDs over other district- based funding mechanisms is that they can be used for ongoing infrastructure operations and maintenance in addition to capital costs.
• Reimbursement Agreements: If one developer is required to provide additional infrastructure capacity or amenities to serve an entire district or area, a reimbursement agreement can be established to receive payments from later developers who benefit from these early improvements. Although reimbursement agreements can be established privately and
March 24, 2026 15
separately from any other funding or park delivery mechanism, these agreements are more often incorporated into the structure of a CFD.
Zoning incentive tools can be used to increase the likelihood that developers will opt-in to provide land for parks and other public facilities, but the value and impact of these incentives may be limited. These mechanisms typically rely on the exchange of a benefit for increased development rights for commercial properties (as housing is often subject to State or local density bonuses and protections that limit developer incentives to purchase additional development rights). Examples of these mechanisms include the following:
• Community Benefits programs: The Area Plan can potentially incorporate a structured community benefits program in which property owners must set aside land for parks or make other contributions in exchange for greater development rights. However, community benefits programs may be less effective for ensuring parkland dedication since smaller properties would be unable to provide a land dedication.
• Transfer of Development Rights (TDR): Under such a program, property owners could transfer unused development potential from one property with certain characteristics (the “sending site” or “originating site”) to another property (the “receiving site”). The transfer enables the owner of the receiving site to develop additional gross floor area above and beyond what would otherwise be allowed. The sending site, having transferred away its development potential, could become a prime location for future parks. The value of the TDR depends on the relative financial feasibility of development at the base allowed density, financial feasibility of building types, and market strength. TDR programs for providing parks are generally most useful when the sending site is already a natural area, so the potential usefulness of TDR in the already-developed Plan Area is likely limited.
Mobility Alternatives Implementation Considerations
The Plan Alternatives include “Mobility Alternatives” that will require a strategic approach to fund the envisioned improvements and, in some instances, acquire easements or rights of way from private property owners.
2 The following conceptual assessment is intended to inform community and decisionmaker deliberations regarding the Mobility Alternatives. The findings describe challenges for delivery of each Mobility Alternative, explain the major cost drivers associated with each Mobility Alternative, and identify the pros and cons of potential funding mechanisms and land acquisition tools to implement the Mobility Alternatives.
The Plan envisions mobility improvements along all major roads and intersections within the Plan Area. The proposed Mobility Alternatives add walking and biking facilities designed to improve comfort and align with applicable safety standards. This memo examines the specific Mobility Alternatives which cover the segment of San Antonio Road from Charleston Road to Middlefield Road. This is the segment with the greatest range of potential improvements, and the key characteristics chosen in this segment can be carried forward to other road segments. The
2 For purposes of this memo, “easements” refers to a right of public access through a private property to construct wider sidewalks and/or cycle tracks. “Right of way” refers to land owned by the City of Palo Alto for transportation needs.
March 24, 2026 16
alternatives featured in this report are titled MSA-1, MSA-2, and MSA-3, in order of least change to most change. MSA-1 primarily requires street restriping and more significant changes at the Fabian Way intersection; MSA-2 envisions creation of a shared-use path on the north side of San Antonio Road and an on-street bikeway on the south side; and MSA-3 envisions creation of a two-way separated bikeway and wider sidewalks on both sides of San Antonio Road. Full details are available in the “Plan Alternatives Memorandum.”
Figure 14 describes the cost drivers, relative magnitude of costs, and other implementation considerations for the Mobility Alternatives. Generally, any changes to ownership and fixed physical infrastructure will drive significant costs for purchases of access/land and construction, respectively.
Critical factors for each Mobility Alternative are as follows:
• MSA-1 is the lowest cost intervention since it entails the fewest changes to major infrastructure and little need for the City of Palo Alto to acquire easements or rights of way from private property owners. MSA-1 primarily requires relatively low-cost street restriping, along with one higher-cost change to reconfigure the extant public right of way at Fabian Way. Sidewalk widening—which would require acquisition of easements or rights of way—is optional in MSA-1 and can potentially be completed in incremental segments where easements or rights of way are already available and as street frontages are improved by future development projects.
• The MSA-2 alternative entails higher costs than MSA-1 due to the need to acquire additional easements or rights of way for a separate multi-use path on one side of San Antonio Road, construct the path, and address related infrastructure adjustments and possible tree removal and replacement in limited locations.
• MSA-3 is likely to entail substantially higher costs than MSA-1 or MSA-2. MSA-3 requires acquisition of easements or rights of way on both sides of San Antonio Road from numerous property owners. MSA-3 also requires moving curbs and reconstructing the street, as well as moving and rebuilding significant public and private sewer and utilities infrastructure in the existing street right of way, and replanting of existing street trees located between the sidewalk and curb. In addition to the impacts to City-owned utilities, those infrastructure adjustments may also require coordination with outside utility operators and reimbursement of related expenses.
March 24, 2026 17
FIGURE 14: COST DRIVERS, IMPLEMENTATION CONSIDERATIONS, AND RELATIVE COST IMPACTS FOR EACH MOBILITY
ALTERNATIVE
Category
Maintain
Existing
ALT MSA-1
Separated Bikeway, Wider
Sidewalks
ALT MSA-2
Shared Use Path (north) +
Bikeway (south)
ALT MSA-3
Two Way Bikeway Both
Sides
Likely Cost
Drivers:
No
change
• Includes reconfiguration
of public right of way at
intersection with Fabian
Way to remove diagonal
parking and create new
ped/bike facilities
• Street restriping
• Optional sidewalk
widening where public
easement or right of way
already exists or can be
obtained (up to 3 feet of
easement and
improvements on each
side)
Same as MSA-1, PLUS:
• Acquisition of additional
7’ or more public
easement or right of way
from western property
owners
• Construction of multi-use
path and related
intersection safety
improvements
• Limited public
infrastructure changes at
“pinch points”
• Removal and replacement
of 1 or more trees
• Includes reconfiguration
of public right of way at
intersection with Fabian
Way to remove diagonal
parking and create new
ped/bike facilities
• Moving curbs, and
significant reconstruction
of the street; related
intersection
improvements
• Need to move numerous
utilities and infrastructure
(e.g., sewers, backflow
preventers, utility boxes)
• Construction of separate
sidewalks and cycle
tracks
• Removal and
replacement of all
existing street trees.
• No change to the median
• Optional sidewalk
widening where public
easement or right of way
already exists or can be
obtained (up to 3 feet of
easement and
improvements on each
side)
Other
Implementation
Considerations:
None • Potential for low-cost
incremental sidewalk
widening at frontages of
new development
projects
• Requires acquisition of
public easements or rights
of way at The Greenhouse
• Requires acquisition of
public easement for two
property owners north of
The Greenhouse or for the
pathway to be constructed
at time of redevelopment,
(795, 797, 799, 80 San
Antonio Rd)
• Requires comprehensive
coordination with existing
property owners on
relocation of
infrastructure serving
their property
• Requires acquisition of
public easements or
rights of way from
properties near major
intersections where
existing curb-to-curb
dimension is limited
• Requires coordination
and agreements with
outside agencies and
companies operating
public utilities and private
services
Relative Cost
Impacts:
None $ $$ $$$$$
Source: Raimi+Associates, 2026; Strategic Economics, 2026.
March 24, 2026 18
A portion of the Mobility Alternatives’ costs would likely be funded via the City of Palo Alto’s existing citywide and outside sources of revenues for capital improvement projects. Capital improvement projects for street and mobility improvements in the City of Palo Alto are generally at least partly funded through the City’s Capital Improvement Fund. That fund receives revenue from citywide sources such as a base transfer from the General Fund and dedicated Transient Occupancy Tax revenue. Specific projects may receive funding generated by other local taxes and impact fees. The Capital Improvement Fund also combines outside federal, state, and local agency sources such as project -specific grants and Gas Tax revenues. Although the Capital Improvement Fund is a useful tool for constructing the improvements in the Mobility Alternatives, all City projects compete for this funding. Therefore, additional revenues generated from within the Plan Area will likely be required.
In addition to existing funding sources for mobility improvements, development activity within the Plan Area can potentially contribute funding toward buildout of the Mobility Alternatives through several existing and potential mechanisms. Significant options include the following:
• Transportation Impact Fee (existing) : The City imposes a Transportation Impact Fee on new development that is used to fund mobility improvements. As with all impact fees subject to the State of California’s Mitigation Fee Act, the Transportation Impact Fee must be used to mitigate the impacts of development rather than address existing deficiencies. As of Fiscal Year 2025, the Citywide fee charges $10,103.99 per net new PM peak hour trip. Although new development in the Plan Area would generate fee revenues, the improvements in the Mobility Alternatives would need to compete with all other mobility improvement projects in the City for funding. Fee revenues are also a “pay as you go” source since they are too volatile to support issuance of bonds that would provide up-front funding for public improvements.
• Plan Area-Specific Impact Fee: The City of Palo Alto could also establish a new impact fee that applies within the Plan Area (and any other relevant part of the City) to specifically fund improvements within the Plan Area. A similar approach was used by the City when it established the Charleston Arastradero Traffic Impact Fee for targeted mobility and safety improvements. A Plan Area-specific impact fee would provide a dedicated stream of funding for implementing the selected Mobility Alternatives. However, the fee would also increase costs for new development, and the maximum fee amount may be limited by the legal requirement to prove the “nexus” between the cost of improvements and the impacts of new development projects.
• Revised Development Standards : Development standards include on -site and off-site improvements that must be met by new private development projects. Revisions to development standards in the Plan Area c ould require reasonable easements and improvements that help implement the Mobility Alternatives’ improvements. However, new development standards would be unable to address comprehensive corridor-wide mobility improvements since project-specific changes would result in a patchwork of conditions. The development standards also must be reasonably proportionate to the development projects’ impacts.
• Enhanced Infrastructure Financing District: An EIFD, as described in the Park Delivery Tools findings, would allow the City of Palo to issue bonds for construction o f improvements in the Mobility Alternatives. The bonds would be repaid by incremental growth of property tax revenue from within the EIFD. The EIFD provides up -front funding for construction of public
March 24, 2026 19
improvements to support private investment in the Plan Area and grow permanent property tax revenues. However, the EIFD also temporarily diverts property tax revenue (until bond payment obligations are met) that would otherwise accrue to the City’s General Fund.
• Community Facilities District: A CFD—described earlier in the Parks Delivery Tools section of this memo—would ensure that properties within the Plan Area contribute funding for public improvements through a special assessment. The CFD also supports bond issuance for up - front construction of improvements. However, passage of a CFD covering much of the San Antonio Road corridor may be especially difficult. Since the area includes 12 or more registered voters, the CFD—and its annual special tax assessment —would need to be approved by two - thirds of registered voters. However, a smaller CFD could potentially be approved in areas of the corridor in which two -thirds of nonresidential property owners are interested in funding improvements so they can enhance the value of their properties and support future development opportunities.
Acquisition of easements or land to implement the MSA-2 and MSA-3 Mobility Alternatives will require individual purchases from affected property owners. The City of Palo Alto will need to purchase easements or land from property owners to implement any Mobility Alternative improvements requiring additional public access (except for new development projects subject to revised standards). These purchases are typically completed via voluntary negotiations. However, the City can also use eminent domain t o compe l property owners to provide land or easements in exchange for compensation.
Regardless, acquiring land or easements will become more expensive and time-consuming as the number of properties increases.
March 24, 2026 20
Appendix
FIGURE 15: INDUSTRIAL PROPERTY SALES IN THE PLAN AREA, 2024-2026 Property Address Location
Year
Built Sale Price Sale Year $ / SF of Land $ / Acre of Land 4007-4009 Transport
St CTI Subarea 1965 $6,800,000 2025 $312.21
$13,600,000
947 Industrial Ave CTI Subarea 1957 $958,500 2025 $277.84 $12,102,273 940 Commercial St CTI Subarea 1956 $4,100,000 2024 $209.16 $9,111,111 868 San Antonio Rd CTI Subarea 1955 $4,365,000 2024 $263.70 $11,486,703 760 San Antonio Rd Plan Area 1975 $5,525,000 2025 $282.55 $8,246,325 Source: CoStar, 2024-2026; Strategic Economics, 2026.
March 24, 2026 21
FIGURE 16: PARK DEVELOPMENT COST AND EXISTING POLICY CONTRIBUTION ASSUMPTIONS AND CALCULATIONS Assumptions Park Development Cost Existing Policy Cost and Calculations (4)
Park
Area
(Acres)
Townhome
Units (B)
Multifamily
SF (C) (1)
Office SF
(D)
Existing
Commercial
SF (E)
Land Cost
(Acquisition) (2)
Construction
Cost (3)
Parkland
Dedication
Requiremen
t (Acres) (F)
Parkland
Dedicated
(G) (5)
Land Cost
(Dedication) (2) Impact Fee (6)
Less: Fee
Credit (7)
Calculation N/A N/A N/A N/A N/A
A *
$11,000,000
A *
$2,372,950
(B * 531) /
43,560
Lesser of
A or F
G *
$11,000,000
(C * $44.20) +
(D * $19.71) E * $19.71
Maxar Site
Scenario 1A 2.0 260 612,000 0 683,000 $22,000,000 $4,745,880 3.2 2.0 $22,000,000 $26,436,564 $13,459,492 Scenario 1B 2.0 175 1,100,750 0 683,000 $22,000,000 $4,745,880 2.1 2.0 $22,000,000 $35,706,528 $13,459,492 Scenario 2A 4.5 200 663,000 0 683,000 $49,500,000 $10,678,230 2.4 2.4 $33,522,727 $15,421,329 $13,459,492 Scenario 2B 4.5 115 1,151,750 0 683,000 $49,500,000 $10,678,230 1.4 1.4 $32,348,485 $20,828,808 $13,459,492 CTI Subarea
Scenario 3A 1.0 0 1,142,400 0 528,800 $11,000,000 $2,372,940 0 0 $0 $50,494,080 $10,420,760 Scenario 3B 1.0 0 1,468,800 0 528,800 $11,000,000 $2,372,940 0 0 $0 $64,920,960 $10,420,760 Scenario 3C 1.0 0 1,213,800 675,000 528,800 $11,000,000 $2,372,940 0 0 $0 $66,951,800 $10,420,760 Scenario 3D 1.0 0 1,700,000 825,000 528,800 $11,000,000 $2,372,940 0 0 $0 $91,397,805 $10,420,760 Scenario 4A 3.0 0 982,600 0 528,800 $33,000,000 $7,118,820 0 0 $0 $43,430,920 $10,420,760 Scenario 4B 3.0 0 1,251,200 0 528,800 $33,000,000 $7,118,820 0 0 $0 $55,303,040 $10,420,760 Scenario 4C 3.0 0 996,200 675,000 528,800 $33,000,000 $7,118,820 0 0 $0 $57,333,880 $10,420,760 Scenario 4D 3.0 0 1,275,000 825,000 528,800 $33,000,000 $7,118,820 0 0 $0 $72,612,805 $10,420,760 SF: Square Feet
(1) Each scenario’s multifamily square footage is equal to the number of multifamily rental units identified in Figure 1 multiplied by the average unit size of multifamily developments based on market research (850 square feet).
(2) The land acquisition cost for the development of parks reflects the high-end value from Figure 10 as most of the properties in the studied subareas have existing improvements. (3) The Construction Cost category includes Park Construction, Planning & Design, and Administration. (4) Rates in the “Calculation” row of this section of the Figure refer either to conversions from acres to square feet or to Palo Alto’s existing policy rates, or both. (5) The parkland dedicated does not exceed the park area specified by the development scenario, even if the Parkland Dedication requirement does exceed the scenario (as in Scenarios 1A and 1B).
(6) The Impact Fee column combines both the multifamily rental impact fee and the commercial impact fee. (7) The Fee Credit each scenario receives for existing commercial development represents the maximum possible fee credit (i.e., the total replacement of exist ing structures in both subareas) as both a conservative estimate of each scenario’s ability to pay for parks improvements and due to a lack of knowledge about the rate of redevelopment in each subarea.
Source: City of Palo Alto, 2025; Raimi and Associates, 2026; Strategic Economics, 2026.
March 24, 2026 22
FIGURE 17: TOTAL PARK DEVELOPMENT COST AND DEVELOPER CONTRIBUTIONS BY SCENARIO
Existing Policy
Developer
Contribution Cost
Park Development
Cost
Difference (Policy Cost -
Park Development Cost)
Maxar Site
Scenario 1A $35,590,908 $26,745,880 $8,845,028
Scenario 1B $57,193,658 $26,745,880 $30,447,778
Scenario 2A $42,663,290 $60,178,230 -$17,514,940
Scenario 2B $52,868,313 $60,178,230 -$7,309,917
CTI Subarea
Scenario 3A $40,073,320 $13,372,940 $26,700,380
Scenario 3B $54,500,200 $13,372,940 $41,127,260
Scenario 3C $56,531,040 $13,372,940 $43,158,100
Scenario 3D $80,977,045 $13,372,940 $67,604,105
Scenario 4A $33,010,160 $40,118,820 -$7,108,660
Scenario 4B $44,882,280 $40,118,820 $4,763,460
Scenario 4C $46,913,120 $40,118,820 $6,794,300
Scenario 4D $62,192,045 $40,118,820 $22,073,225
Source: Strategic Economics, 2026.
FIGURE 18: OWNERSHIP TOWNHOME PROTOTYPES' REVENUE ASSUMPTIONS Unit of Measure 3-Story Townhomes (Garage Parking)
3-Story
Townhomes
(Podium
Parking)
Average Sales Price per market-rate unit $2,252,500 $2,082,500
per below market-rate
unit $415,000 $415,000
Marketing Expense % of Sales Price 5% 5%
Net Revenue per Market-Rate Unit per unit $2,139,875 $1,978,375 Source: Strategic Economics, 2026.
March 24, 2026 23
FIGURE 19: OWNERSHIP TOWNHOME PROTOTYPES' COST ASSUMPTIONS Unit of Measure
3-Story
Townhomes
(Garage Parking)
3-Story
Townhomes
(Podium Parking)
Hard Costs
Site Prep Site Square Feet $40 $40
Building Construction GSF Building (a) $285 $285
Parking
Podium Parking Space N/A $45,000
Soft Costs
Architecture, Engineering, and Consulting % of Hard Costs 5% 5% Taxes, Insurance, Legal and Accounting % of Hard Costs 10% 10% Municipal Fees % of Hard Costs 23% 23%
Other Soft Costs % of Hard Costs 3% 3%
Financing Assumptions
Amount Financed % of Hard + Soft Costs 55% 55%
Average Outstanding Balance % of Amount Financed 55% 55% Construction Loan Fee % of Amount Financed 1.0% 1.0%
Construction Interest 7.6% 7.6%
Term Months 18 22
Interest Costs 3.4% 4.2%
Amount Financed*Loan Fee 0.6% 0.6%
Total Financing Cost % of Hard + Soft Costs 4.0% 4.7%
Contingency % of Hard + Soft Costs 5% 5%
Land Acquisition Cost
Land Cost Site Square Feet $253 $253
(a) Gross Square Feet, which does not include parking
Source: Strategic Economics, 2026.
March 24, 2026 24
FIGURE 20: OWNERSHIP TOWNHOME PROTOTYPES' PRO FORMA RESULTS
3-Story Townhomes (Garage
Parking)
3-Story Townhomes (Podium
Parking)
Revenues
Sales Values
Market Rate Units $450,500,000 $583,100,000
Below Market Rate Units $20,750,000 $29,050,000
Gross Revenue $471,250,000 $612,150,000
Less Marketing and Administration -$23,562,500 -$30,607,500 Total Sales Proceeds $447,687,500 $581,542,500
Hard Costs $142,905,000 $246,894,000
Demolition and Site Work $21,780,000 $21,780,000
Building Construction $121,125,000 $169,575,000
Parking $55,539,000
Soft Costs $58,591,050 $101,226,540
Architecture, Engineering, and
Consulting $7,145,250 $12,344,700
Taxes, Insurance, Legal and
Accounting $14,290,500 $24,689,400
Municipal Fees $32,868,150 $56,785,620
Other Soft Costs $4,287,150 $7,406,820
Financing Costs $8,421,260 $17,335,646
Contingency $10,074,803 $17,406,027
Land Costs $137,500,000 $137,500,000
Total Development Costs $357,492,113 $520,362,213
Feasibility
Total Revenue $447,687,500 $581,542,500
Target Return on Cost 15% 15%
Supportable Development Cost $389,293,478 $505,689,130 Total Development Costs (Excluding
Land) $219,992,113 $382,862,213
Residual Land Value $169,301,365 $122,826,918
Typical Land Cost $137,500,000 $137,500,000
Source: Strategic Economics, 2026.
FIGURE 21: MULTIFAMILY RENTAL PROTOTYPE REVENUE ASSUMPTIONS Unit of Measure 5-Story Multifamily 8-Story Multifamily Rent Assumptions
Average Unit Size Square Feet 850 850
Monthly Rent per Square Foot $5.50 $5.50
Average Monthly Rent per Unit $4,675 $4,675
Other Revenue Assumptions
Vacancy Rate % of Units 5% 5%
Operating Expenses % of Market Rate Revenue 30% 30%
Source: Strategic Economics, 2026.
March 24, 2026 25
FIGURE 22: MULTIFAMILY RENTAL PROTOTYPE COST ASSUMPTIONS Unit of Measure 5-Story Multifamily 8-Story Multifamily Hard Costs
Site Prep Site Square Feet $40 $40
Building Construction
Residential - Type V GSF Building (a) $310 $310
Residential - Type III GSF Building (a) $330 $330
Residential - Type I GSF Building (a) $400 $400
Parking
Podium Parking Space $45,000 $45,000
Underground Parking Space $80,000 N/A
Soft Costs
Architecture, Engineering, and Consulting % of Hard Costs 5% 5% Taxes, Insurance, Legal and Accounting % of Hard Costs 5% 5% Municipal Fees % of Hard Costs 23% 23%
Other Soft Costs % of Hard Costs 3% 3%
Financing Assumptions
Amount Financed % of Hard + Soft Costs 55% 55%
Average Outstanding Balance % of Amount Financed 55% 55% Construction Loan Fee % of Amount Financed 1.0% 1.0%
Construction Interest 7.6% 7.6%
Term Months 28 30
Interest Costs 5.3% 5.7%
Amount Financed*Loan Fee 0.6% 0.6%
Total Financing Cost % of Hard + Soft costs 5.9% 6.3%
Contingency % of Hard + Soft Costs 5% 5%
Land Acquisition Cost
Land Cost Site Square Feet $253 $253
(a) Gross Square Feet, which does not include parking
Source: Strategic Economics, 2026.
March 24, 2026 26
FIGURE 23: MULTIFAMILY RENTAL PROTOTYPES' PRO FORMA RESULTS 5-Story Multifamily 8-Story Multifamily
Net Operating Income
Annual Revenue $7,854,000 $17,952,000
Less Costs -$2,748,900 -$6,283,200
Vacancy -$392,700 -$897,600
Operating Expenses -$2,356,200 -$5,385,600
Net Operating Income $5,105,100 $11,668,800
Hard Costs $64,812,500 $138,566,667
Demolition and Site Work $2,600,000 $4,400,000
Building Construction $49,087,500 $116,166,667
Parking $13,125,000 $18,000,000
Soft Costs $23,332,500 $49,884,000
Architecture, Engineering, and Consulting $3,240,625 $6,928,333 Taxes, Insurance, Legal and Accounting $3,240,625 $6,928,333 Municipal Fees $14,906,875 $31,870,333
Parks Fee $5,259,800 $12,022,400
Other Soft Costs $1,944,375 $4,157,000
Financing Costs $5,447,718 $12,401,208
Contingency $4,407,250 $9,422,533
Land Costs $16,414,141 $27,777,778
Total Development Costs $114,414,109 $238,052,186
Feasibility
Total Net Operating Income $5,105,100 $11,668,800
Target Yield on Cost 5.5% 5.5%
Supportable Development Cost $92,820,000 $212,160,000
Total Development Cost Excl Land $97,999,968 $210,274,408 Residual Land Value -$5,179,968 $1,885,592
Typical Land Cost $16,414,141 $27,777,778
Source: Strategic Economics, 2026.
FIGURE 24: OFFICE PROTOTYPES' REVENUE ASSUMPTIONS
Five-Story Office Eight-Story Office
Vacancy 5.0% 5.0%
Operating Expenses (% of revenue) 6.00% 6.00%
Cap Rate 6.25% 6.25%
Minimum Yield on Cost 7.50% 7.50%
Annual Rent per Sq. Ft. (NNN) $80.00 $80.00
Net Operating Income per Sq. Ft. $71.20 $71.20
Note: Cap rate and yield on cost assumptions were based on review of applicable overall market cap rates and recent sales transaction data from CoStar, as well as input gathered in recent interviews with office developers in Palo Alto and nearby jurisdictions in Santa Clara County.
The assumptions incorporate consideration of the Plan Area’s current market positioning as a secondary office market location within Palo Alto (compared to locations such as Downtown, near Caltrain stations, and in/near Stanford Research Park).
Source: Strategic Economics, 2026.
March 24, 2026 27
FIGURE 25: OFFICE PROTOTYPES' COST ASSUMPTIONS
Unit of Measure Five-Story Office Eight-Story Office
Hard Costs
Site Prep Site Square Feet $40 $40
Construction Costs GSF Building (a) $390 $390
Tenant Improvements (PNSF) NSF Building (b) $100 $100
Parking
Surface Parking Space $10,000 $10,000
Structured Garage Parking Space $45,000 $45,000
Underground Parking Space $80,000 $80,000
Soft Costs
Architecture, Engineering, and Consulting % of Hard Costs 5% 5% Taxes, Insurance, Legal and Accounting % of Hard Costs 3% 3% Developer Fee % of Project Budget 3% 3%
Municipal Fees % of Hard Costs 15% 15%
Other Soft Costs % of Hard Costs 3% 3%
Financing Assumptions
Amount Financed % of Hard + Soft Costs 65% 65%
Average Outstanding Balance % of Amount Financed 60% 60% Construction Loan Fee % of Amount Financed 1.0% 1.0%
Construction Interest 7.6% 7.6%
Term Months 24 30 Interest Costs 5.9% 5.9%
Amount Financed*Loan Fee 0.7% 0.7%
Total Financing Cost % of Hard + Soft Costs 6.5% 6.5%
Contingency % of Hard + Soft Costs 5% 5%
Land Acquisition Cost
Land Cost Site Square Feet $250 $250
(a) Gross Square Feet
(b) Net Square Feet
Source: Strategic Economics, 2026.
March 24, 2026 28
FIGURE 26: OFFICE PROTOTYPES' PRO FORMA RESULTS
Five-Story Office Eight-Story Office
Revenues
Income $12,768,000 $20,428,800
Net Operating Income $11,363,520 $18,181,632
Total Capitalized Value $181,816,320 $290,906,112
Hard Costs $111,872,000 $170,210,000
Demolition and Site Work $3,812,000 $3,812,000
Building Construction $65,520,000 $104,832,000
Tenant Improvements $15,960,000 $25,536,000
Parking $26,580,000 $36,030,000
Soft Costs $33,803,768 $51,431,452
Architecture, Engineering, and Consulting $5,593,600 $8,510,500 Taxes, Insurance, Legal and Accounting $3,356,160 $5,106,300 Developer Fee $4,717,048 $7,176,852
Municipal Fees $16,780,800 $25,531,500
Parks Fee $3,310,680 $5,297,088
Other Soft Costs $3,356,160 $5,106,300
Financing Costs $9,228,285 $14,040,568
Contingency $7,047,936 $10,723,230
Land Costs $23,825,000 $23,825,000
Total Development Costs $185,776,990 $270,230,250
Feasibility
Minimum YOC 7.50% 7.50%
Total Supportable Value $151,513,600 $242,421,760
Total Development Costs (excluding land) $161,951,990 $246,405,250 Residual Land Value -$10,438,390 -$3,983,490
Typical Land Cost $23,825,000 $23,825,000
Source: Strategic Economics, 2026.