Updated: Medical Office Building on Los Gatos Boulevard?

Update: 11 a.m. Thursday

The Los Gatos Planning Commission denied a developer's request Wednesday evening to be exempt from having to build retail or restaurant on a project that calls for a 40,000-square-foot, two-story building at the corner of Los Gatos Boulevard and Gateway Drive, the site of the empty Swanson Ford dealership.

"Ultimately, it [retail or restaurant] was a specific requirement of the [project]," said Los Gatos senior planner Joel Paulson. "The Los Gatos Town Council added that requirement to the ordinance ... It was specific direction from the council. They [commissioners] didn't feel comfortable recommending approval."

Planners considered project applicant SHP Newark LLC's request to modify plans to exclude 8,500 square feet of retail or restaurant from the proposal.

The building, which the developer wants to use solely for medical purposes, would be built on a two-acre site, 15400 Los Gatos Blvd., that was most recently occupied by Swanson Ford and Hertz Rental Car, as well as McHugh Lincoln Mercury.

In June 2009, the Los Gatos Town Council gave the project a green light, but it was for a 40,000-square-foot, two-story building with at-grade or below-grade parking for 197 vehicles.

Back then, the council stipulated the project should have a minimum of 8,500 square feet of retail or restaurant space fronting Los Gatos Boulevard.

The applicant, however, is now asking for that stipulation to be removed. SHP Newark LLC, a subsidiary of San Mateo-based Sand Hill Property Co., has told town officials he would like to be exempt from building retail, because there is no interest from the retail community during the past three years.

SHP Newark LLC has also indicated a single tenant medical office user is interested in the entire building.

According to a staff report, ever since the recession, the lending environment has been challending for developers. Speculative mixed-use office/retail developments have not been successful in obtaining financing.

"They would like it to be all office, so they're asking to have the earlier approval modified," explained Los Gatos senior planner Suzanne Davis.

The matter is expected to go before the Town Council Nov. 7, Davis said.

The medical operator would serve the community on several fronts, according to the report. It would provide additional medical services not available, would stimulate development on Los Gatos Boulevard and encourage connectivity to the adjacent parcels and uses.

Davis explained that medical offices are the most desired use for the area, because of the proximity to and other medical and dental offices nearby.

"There seems to be more of a demand for medical ... in this area right now. It's desirable to have locations close to a major hospital, and a lot of people seem to want to own their own space these days; many medical professionals are wanting to own their own space versus leasing."

The applicant, according to Davis, could do either medical or regular commercial offices. New retail, however, is found on Los Gatos Boulevard, particularly with next to Office Depot and the Verizon store and Ace Hardware businesses.