City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Administrative Services
Meeting Date: June 15, 2026
Report #:2605-6406
TITLE
Approval of a First Amendment to Lease With 1900 Embarcadero Property Owner, LP, to Continue Occupying an Approximate 5,469 Square Foot Portion of the Office Building at 1900 Embarcadero Road, Through June 30, 2031, at a Total Base Rent of $1,306,605; CEQA Status – Exempt under CEQA Guidelines Section 15301
RECOMMENDATION
Staff recommends that the City Council authorize the City Manager or their designee to execute the First Amendment to Lease with 1900 Embarcadero Property Owner, LP, contained in Attachment A, extending the lease for five years.
BACKGROUND
On June 22, 2021, the City Council approved the current lease with 1900 Embarcadero Property Owner, LP, for approximately 5,469 square feet of office space at 1900 Embarcadero Road, Suites 110, 201, 205, and 207, for use by the Regional Water Quality Control Plant staff (CMR 115431). The lease commenced on July 1, 2021, and will expire on June 30, 2026. The City has an option to extend the term for an additional five years with rent adjusted to 95% of the prevailing market rental. The current base rent is $32,623.66 per month and the City also reimburses the landlord for increases in operating expenses over the 2021 base year amount.
The City’s share of the 2026 calendar year expense is estimated at $4,920.68 per month, which brings the City’s total rent to $37,544.34 per month.
On August 21, 2023, the City Council authorized staff to explore the purchase of one or more properties adjacent to the RWQCP and to pursue long-term lease options as an alternative to new construction on-site. Aligned with City Council’s direction, staff pursued the option of extending the term for an additional five years while concurrently exploring the possibility of purchasing the property, which is currently on the market, to maintain long-term flexibility and control over this strategically located asset.
1 City Council, June 22, 2021; Agenda Item # 2, CMR 11543, https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=2276&dbid=0&repo=PaloAlto&searchid=a5bf666f- f986-41b8-9e70-4a81da2716b1
ANALYSIS
Staff and the landlord have agreed to adjust the base rent to $20,508.75 (compared to $32,623.66 currently or 95% of the prevailing market rental) for the first year of the extension term, commencing on July 1, 2026 and increasing 3% annually. The City will continue to reimburse the landlord for increases in operating expenses over the 2021 base year amount which will bring the City’s total rent to $25,429.43 per month. All other terms in the original agreement remain unchanged.
Table 1: Lease Key Terms
Extension Term July 1, 2026 – June 30, 2031
Premises Leased Suites 110, 201, 205 and 207
Rentable Area of Premises 5,469 square feet
Rentable Area of Building 25,303 square feet
Base Rent Months of Extension
Term
Base Rent per
Rentable Square Foot
Monthly Base
Rent
7/1/2026 – 6/30/2027 $3.75 $20,508.75
7/1/2027 – 6/30/2028 $3.86 $21,124.01
7/1/2028 – 6/30/2029 $3.98 $21,757.73
7/1/2029 – 6/30/2030 $4.10 $22,410.46
7/1/2030 – 6/30/2031 $4.22 $23,082.77
City’s Share 21.6% of Rentable space in the Building
Base Year Calendar year 2021
Parking Spaces Sixteen (16) unreserved spaces
FISCAL/RESOURCE IMPACT
The amended rental costs and estimated operating expenses are within the budget levels in the FY2027 Operating Budget adopted by City Council. No additional funding is required at this time.
STAKEHOLDER ENGAGEMENT
The Real Estate Division met with Public Works and it was determined that the most optimal option to provide functionality and continuity in service was to extend their current lease at 1900 Embarcadero Road while continuing to explore the possibility of purchasing the property.
Real Estate Division staff engaged with the landlord regarding the extension option.
ENVIRONMENTAL REVIEW
Approval of this First Amendment to Lease is exempt from review under the California Environmental Quality Act (CEQA) pursuant to CEQA Guideline Section 15301, Existing Facilities, because it involves negligible or no expansion of existing use.
ATTACHMENTS
Attachment A: First Amendment to Lease
APPROVED BY:
Lauren Lai, Administrative Services Director