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Draft Memorandum September 15, 2017 Redwood City Live/Work Development Feasibility Page 5 When compared to other jurisdictions in the region, Redwood City’s MULW district appears to have a particular focus on preserving commercial activities. The Redwood City MULW district allows for commercial-only structures but requires that any residential units within the district fall within the live/work guidelines (i.e., no stand-alone residential). Additionally, Redwood City’s MULW orientation towards preserving commercial uses is further evidenced by the existing restrictions on multiple-unit dwellings and a relatively low permissible FAR (i.e., maximum of 2.0). Despite the creation of a live/work zoning district in Redwood City in 2013, the City has yet to see its first completed live/work project. While Redwood City has taken a proactive approach towards planning and regulating live/work structures, many other communities adopt live/work regulations as a reactionary measure to permit activities that may already be taking place in their communities. Success of Live/Work Product Type While data on the number and location of live-work units and space in the Bay Area is difficult to obtain, readily available information collected by EPS suggests that while this product type does exist in a number of communities it is relatively rare, particularly compared to other residential and commercial mixed-use products. Moreover, the communities and subareas where live/work appears to be most prevalent are relatively affordable, working-class neighborhoods (e.g., pockets of San Jose and the East Bay). Examples in San Mateo exist in coastal communities such as Half-Moon Bay and unincorporated areas (e.g., Princeton). This pattern suggests that market forces for live/work development are weaker than that of other land use types. In a regional context, live/work units appear particularly well suited for individuals in creative fields who may not otherwise be able to afford both a residential unit and a viable work space. Emeryville’s emerging Arts District is an example of such an area within the Bay Area region. This area is home to several art galleries and workspaces. Additionally, Emeryville’s Arts District currently houses two live/work buildings oriented to serve local artists (Emeryville Artists Co-Op and Bakery Lofts) with another one planned (Pelco Lofts). Many high-cost markets like Redwood City, and much of the Silicon Valley, lack a critical mass of artist and “maker” populations. As part of this analysis, EPS compiled a brief sample of existing or planned live/work projects within the Bay Area (see Appendix). Of the examples, only one project (Cupertino Live + Work) is located along the Peninsula. Furthermore, it is important to note that of these case studies, none of them would be permitted within Redwood City’s current MULW zoning district. These projects would be disqualified on the basis of including residential-only units, having detached work spaces, exceeding the MULW FAR, or being in a multi-family format. As a unique real estate offering, live/work units can be challenging to underwrite and regulate. In particular, the restrictive nature of their operations (resident must also occupy commercial space and hold valid business license) creates a challenge for developers to build this product type speculatively. Among other things, the risk associated with ensuring continuous employment and residents in the same unit is not well accommodated in financial markets or by lending institutions. Because of this, there are few real estate investment firms who carry substantial expertise and experience in live/work development. Rather, live/work is generally developed by boutique real estate firms and may carry significant risk due to its operational challenges and programming limitations. While, the developer of Cupertino Live + Work reports to have completed numerous