Complete Guide to Commercial Buildouts in Palo Alto

Palo Alto’s Commercial Market: An Overview

Palo Alto occupies a unique position in the Bay Area commercial landscape. As the home of Stanford University and the symbolic birthplace of Silicon Valley, the city attracts a concentration of venture capital firms, technology startups, professional services, upscale retail, and destination dining. Commercial real estate in Palo Alto commands some of the highest lease rates in the South Bay.

The city’s commercial corridors each have distinct identities:

University Avenue runs from the Caltrain station to the Stanford campus and serves as Palo Alto’s main street. Ground-floor spaces on University Avenue are highly sought after for retail, dining, and professional services. Lease rates run $5-$10+/sqft NNN, and the city maintains strict design standards for storefronts and signage.

California Avenue is a pedestrian-friendly commercial street with a mix of restaurants, shops, and professional offices. The area has seen significant redevelopment and attracts a loyal customer base from surrounding neighborhoods and the Caltrain station. Lease rates are comparable to University Avenue in the best blocks.

El Camino Real is a major arterial with a mix of commercial uses, from auto dealerships and strip retail to medical offices and larger format retail. Lease rates are lower than downtown ($3-$6/sqft NNN), and spaces are generally larger. El Camino offers more flexibility for buildout design, as the corridor does not have the same architectural standards as downtown.

Stanford Research Park hosts corporate offices, R&D facilities, and professional services in a campus-style setting. Buildouts here are primarily office-focused and follow Stanford’s architectural guidelines.

Types of Commercial Buildouts in Palo Alto

Office Buildouts

Office tenant improvements are the most common commercial buildout type in Palo Alto. Typical scope includes:

• Space planning and layout (open plan, private offices, conference rooms)
• Electrical and data infrastructure (power, structured cabling, WiFi access points)
• HVAC modifications for the new layout
• Lighting design and installation
• Flooring (carpet tile, LVT, or polished concrete)
• Drywall partitions and glass office fronts
• Kitchen or break room construction
• Restroom upgrades
• ADA compliance improvements

Cost range: $80-$175/sqft for standard office buildouts. Premium finishes, high-end conference rooms, and specialized infrastructure (server rooms, AV systems) push costs to $175-$250+/sqft.

Retail Buildouts

Retail buildouts focus on customer experience, brand identity, and product display. The scope typically includes:

• Storefront design and construction (display windows, entry systems)
• Interior layout and customer flow design
• Custom fixtures, shelving, and display systems
• Point-of-sale infrastructure
• Lighting (ambient, accent, and display)
• Flooring (high-durability options appropriate for foot traffic)
• Storage and back-of-house areas
• Signage (interior and exterior)
• ADA accessibility improvements

Cost range: $100-$250/sqft depending on the retail concept, finish level, and amount of custom fixture work.

Restaurant Buildouts

Restaurant buildouts are the most complex and expensive commercial projects due to kitchen infrastructure, health department requirements, and fire safety systems. The scope includes everything in a retail buildout plus:

• Commercial kitchen design and construction
• Type I exhaust hood and fire suppression system
• Commercial plumbing (grease interceptor, three-compartment sink, handwash stations)
• Walk-in coolers and freezers
• Bar construction (if applicable)
• Dining room design (seating, booths, acoustic treatment)
• Health department compliance
• Fire Marshal review and compliance
• ABC license coordination (if serving alcohol)

Cost range: $250-$400+/sqft. A 2,000 sqft full-service restaurant in Palo Alto typically costs $500,000-$800,000+ for a complete buildout.

For detailed restaurant buildout pricing, see our Bay Area restaurant buildout cost guide.

Commercial Buildout Costs in Palo Alto

Commercial buildouts in Palo Alto cost $150 to $350+ per square foot in 2026, averaged across all space types.

All pricing is approximate, reflects 2026 Bay Area market conditions, and is subject to change. Every project is unique. Final costs are determined on a project-by-project basis during our design phase.

Cost by Space Type

Space Type	Cost per Sqft	2,000 Sqft Space
Basic office (open plan, minimal walls)	$80-$125/sqft	$160,000-$250,000
Premium office (private offices, conference rooms)	$125-$200/sqft	$250,000-$400,000
Retail (standard)	$100-$175/sqft	$200,000-$350,000
Retail (high-end, custom fixtures)	$175-$250/sqft	$350,000-$500,000
Restaurant (fast-casual)	$200-$300/sqft	$400,000-$600,000
Restaurant (full-service)	$300-$400+/sqft	$600,000-$800,000+

What Drives Palo Alto Costs Higher

• Design review compliance: Preparing materials for Architectural Review adds $5,000-$20,000 in professional fees for design documentation, renderings, and material boards
• Storefront standards: University Avenue and California Avenue have specific storefront design requirements. Custom storefront systems cost more than standard commercial entries
• Historic considerations: Some Palo Alto commercial buildings have historic significance. Modifications to historic structures face additional review and may require preservation-compatible materials and methods
• Parking requirements: Palo Alto’s parking requirements for commercial uses are among the strictest in the Bay Area. Changes of use (for example, converting office space to a restaurant) may trigger additional parking requirements
• Labor premiums: Palo Alto’s location and project complexity drive labor rates 5-15% above San Jose averages

TI Allowance Considerations

When leasing commercial space in Palo Alto, the tenant improvement (TI) allowance is a key negotiating point. The TI allowance is the dollar amount per square foot that the landlord contributes toward your buildout.

Current TI Allowance Ranges in Palo Alto

Space Type	Typical TI Allowance
Office (Class A)	$80-$135/sqft
Office (Class B)	$40-$80/sqft
Retail (downtown)	$30-$60/sqft
Restaurant	$20-$50/sqft

TI allowances have increased in recent years due to higher vacancy rates and landlord competition for quality tenants. Longer lease terms (7-10 years) and strong tenant credit profiles increase your negotiating power.

Strategy for Maximizing TI Value

Your TI allowance should cover as much of the permanent infrastructure as possible: HVAC, electrical, plumbing, ADA upgrades, and base finishes. Furniture, fixtures, and equipment (FF&E) are typically not covered by TI allowances and should be budgeted separately.

Work with your buildout contractor during the lease negotiation phase. Understanding actual construction costs before you sign helps you negotiate a realistic TI allowance and avoid out-of-pocket surprises.

For more on TI allowances, see our commercial tenant improvement guide.

Permits and Design Review in Palo Alto

Building Permits

Palo Alto’s Development Services Department handles building permits for commercial projects. Plan review timelines:

• Simple interior-only buildouts: 4-8 weeks
• Complex buildouts (restaurant, medical): 8-14 weeks
• Projects with Architectural Review: Add 2-4 months

Architectural Review

Palo Alto’s Architectural Review Board (ARB) reviews projects that alter the exterior appearance of commercial buildings. This includes:

• New storefronts or storefront modifications
• Exterior signage (sign type, size, materials, illumination)
• Facade modifications (materials, colors, fenestration)
• Outdoor dining areas and streetscape elements
• New construction visible from public right-of-way

The ARB evaluates projects for compatibility with Palo Alto’s design guidelines, neighborhood character, and the city’s Comprehensive Plan. Meetings are held regularly, and applications typically require architectural drawings, material samples, color boards, and renderings.

Interior-only buildouts that do not affect the exterior generally do not require Architectural Review.

Change of Use

Converting a space from one use to another (for example, office to restaurant, or retail to medical) may require a change-of-use approval from the Planning Division. This process evaluates parking impacts, traffic, noise, hours of operation, and compatibility with adjacent uses. A change of use in Palo Alto can add 2-6 months to your pre-construction timeline.

ADA Compliance

California’s accessibility requirements exceed federal ADA standards. Commercial tenant improvements in Palo Alto must comply with California Building Code Chapter 11B, which includes:

• Accessible path of travel from the public right-of-way to the primary entrance
• Accessible restrooms (grab bars, clearances, lever hardware, accessible signage)
• Accessible counters and service areas
• Proper door clearances and hardware
• Accessible signage with Braille

Projects below a certain construction cost threshold must dedicate 20% of improvement costs toward accessibility. Projects above the threshold require full accessibility compliance. Palo Alto’s building department reviews accessibility plans carefully during plan check.

Timeline: Commercial Buildout in Palo Alto

Phase	Duration
Site selection and lease negotiation	4-16 weeks
Space planning and concept design	2-6 weeks
Architectural and engineering drawings	4-8 weeks
Architectural Review (if required)	4-12 weeks
Building permit plan review	6-14 weeks
Health department and Fire Marshal review (restaurant)	2-4 weeks (concurrent)
Equipment and material procurement	8-16 weeks (concurrent)
Construction	8-24 weeks
Final inspections and certificate of occupancy	1-3 weeks
Total (office/retail)	5-10 months
Total (restaurant)	8-14 months

Restaurant buildouts take the longest due to hood system fabrication, health department inspections, and often the ABC license process running in parallel.

How Palo Alto Compares

City	Office Cost/Sqft	Restaurant Cost/Sqft	Permit Timeline
Palo Alto	$80-$200+	$250-$400+	6-14 weeks
Menlo Park	$75-$175+	$225-$375+	6-12 weeks
Mountain View	$70-$160+	$200-$350+	4-10 weeks
San Jose	$65-$150+	$150-$350+	4-8 weeks
Redwood City	$65-$150+	$200-$350+	4-8 weeks

Palo Alto commands a premium for commercial buildouts, but the investment is justified by the customer demographics, foot traffic on University and California Avenues, and the prestige of a Palo Alto address. The longer permit timeline requires earlier planning but results in a buildout that meets the city’s high standards.

Custom Home’s Approach to Palo Alto Commercial Buildouts

Custom Home Design and Build brings its design-build methodology to commercial projects in Palo Alto. Our team manages space planning, architectural design, engineering, permit applications (including Architectural Review submittals), construction, and coordination with health department and fire marshal for restaurant projects.

For Palo Alto commercial buildouts, we focus on:

• Understanding the Architectural Review Board’s expectations and preparing submittals that gain approval efficiently
• Designing spaces that maximize functionality within Palo Alto’s design standards
• Managing ADA compliance from the design phase through final inspection
• Coordinating TI allowance documentation with your landlord
• Delivering a completed space that meets the quality expectations of Palo Alto’s market

Start Planning Your Palo Alto Commercial Buildout

Palo Alto’s commercial corridors offer some of the strongest customer demographics in Silicon Valley. Whether you are building out an office, opening a retail shop, or launching a restaurant, the right planning and buildout team make the difference between a smooth opening and months of delays.

Contact Custom Home Design and Build to schedule a consultation and discuss your Palo Alto commercial buildout.