Retail in downtown Palo Alto isn't broken and doesn't need fixing. It could, however, use some protection, particularly when it comes to ensuring a diversity of uses and preventing conversions of shops to office use, the City Council agreed Monday.

The council directed staff to craft a new retail-protection ordinance that would ban gyms, dance studios and other similar uses from University Avenue, though they would still be allowed in downtown's more peripheral blocks.

The new ordinance would replace an existing one that the council passed in 2015 and renewed in 2016 on an “interim” basis. With the existing law set to expire in April, the council is now looking ahead to a successor that would prohibit conversion of ground-floor retail to offices and create new requirements for retail-friendly lobbies and transparent windows.

The main dilemma for the council was how to ensure a vibrant and diverse retail scene without being too restrictive or prescriptive. It opted not to ban from University Avenue “personal services” such as nail salons and barbershops, as was proposed by staff. In fact, most council members agreed that the existing mix of retail on University, including its salons and barbershops, are part of the thoroughfare's success and restricting such uses would prove unpopular.

“If we got rid of the barber shop next to President Hotel, I think there would be a recall effort,” Councilwoman Liz Kniss said during the discussion.

As things stand today, Kniss said, the mix in downtown Palo Alto “looks pretty good.”

“Going into a lot of stores, a lot of retail, people are very happy on University Avenue at the moment,” she said.

She also acknowledged, as have others, that the economy can turn for the worse, with grave implications for some local merchants and new pressures to convert retail establishments to the more lucrative office use. In recent years, former downtown fixtures Zibbibo, Rudy's Pub and Jungle Copy had all shuttered to make way for offices, prompting the council to adopt its retail-protection ordinance last year.

By an 8-0 vote, with Councilman Tom DuBois absent, the council agreed to expand the “ground-floor” district to a few parcels near University, including along Emerson Street. Council members also agreed that the district's purposes should be expanded to include not just use restrictions, but a “desire for active uses, with a high level of transparency and visual ground-floor of properties with frontage on University Avenue."

Mayor Pat Burt favored exploring the idea of allowing new developments to exceed the city's 50-foot height limit by several feet to enable higher ceilings at the lobby level. Planning staff was directed to return with a recommendation on this policy change.

“We've heard for a long while that contemporary retail needs taller ground floor to be effective,” Burt said.

While no one supported banning hair and nail salons from University Avenue, Councilwoman Karen Holman favored creating a limit on how many such businesses would be allowed. She and Burt concurred that while the mix is currently good, the city should be cautious about allowing too many personal-service establishments in the city's commercial core.

“Economies do shift and the government moves slowly and I know staff has adequate capability to determine what the appropriate limitation is,” Holman said.

Her proposal to pursue such a limitation fizzled, however, with only Burt and Councilman Cory Wolbach voting in its favor. Vice Mayor Greg Scharff was among those who felt this is going too far in the direction of micromanagement and that the current downtown scene is doing well and hardly needs fixing.

The downtown vacancy rate, according to staff, is currently below 2 percent and lease rates for retail are currently in the range of $6.50 to $8.25 per square foot (for downtown office space, the rent is $6.50 to $12 per square foot).

Councilman Eric Filseth agreed that the city shouldn't go too far in requiring specific uses.

“In general, we ought to have as little regulation as possible, but not less,” Filseth said.

The city's new ordinance will be further refined in the coming months, with planning staff preparing to conduct outreach with downtown businesses and property owners to discuss the new rules.

The new ordinance is currently scheduled to return to the council for consideration in December or January.