Sunnyvale plans a makeover in the form of ‘Village Centers’ — but displaced businesses face a difficult future

Years before John Agustin took over Western Pacific Filipino Grocery, he was just a kid playing in the parking lot of Fair Oaks Plaza.

He and the other kids from neighboring mom-and-pop shops – the dry cleaners, the liquor store, the Japanese restaurant – would play tag and skateboard in the parking lot. Sometimes, they would place a can far out in the lot and compete to see who could hit it with a slipper.

Today, Agustin runs the grocery store his family has owned for three generations. But soon, the plaza itself will be gone.

The shopping center – located on E. Duane Ave in North Sunnyvale – is one of seven sites the city of Sunnyvale designated in 2017 for transformation into Village Centers — walkable hubs of housing, retail, and outdoor space. New development standards passed on July 1 for the Village Centers sought to preserve retail by designating commercial space, but these rules will not save stores like Agustin’s.

A development proposal for Fair Oaks Plaza has been pending since 2022. Though it initially envisioned only housing on the site, that plan has since been revised to include commercial space comprising 10% of the lot area, according to the city.

Lakewood Shopping Center on Lawrence Expressway, another Village Center site in historically underserved North Sunnyvale, was approved in May for a 101-unit townhome development.

In interviews, District 5 City Councilmember Richard Mehlinger and city staff both pointed to state housing laws that they say restrict the city’s ability to change the plans for Fair Oaks Plaza and require additional retail from the developer.

Under SB 330, the city must evaluate projects based on the rules in place when they’re submitted. While Sunnyvale originally planned to create zoning for the Village Centers after applications came in, state law now lets developers bypass zoning and build under the broader General Plan—opening the door to housing-only projects, which are often much more profitable than mixed-use plans.

Developers are also allowed to request concessions that override local zoning—such as reducing required commercial space—if they include a small percentage of affordable units. Furthermore, the city must enforce the same standards on all housing developments, which means that it cannot reject individual projects based on community interests, Mehlinger said.

Mehlinger said these legal factors have allowed many development proposals that “do not align with the original Village Center vision,” which he is personally “frustrated” with.

Developer Nicholas Gera could not be reached for comment. The proposed Fair Oaks project has not yet been scheduled for public hearing, according to the city.

Himanshu Sethi and Phil Harvey were among a group of residents that met with Mehlinger this past March to discuss preserving retail at the plaza. A petition Sethi spearheaded to exempt North Sunnyvale plazas from Village Center development and prioritize food access in the area has received almost 2,000 signatures.

While they recognize the city’s current limitations, the residents also believe the city had ample time to create objective standards and update its General Plan prior to the passage of these state laws.

“At the end of the day, it doesn’t erase those cities’ long window to act or the consequences of not doing so,” Sethi said. “What’s happened has happened, but I think what we need is support from the city moving forward.”

Harvey said a lot of residents he spoke with were not even aware of the plans for redevelopment and are “very, very upset.”

“This is very much part of the community,” he said of Fair Oaks Plaza.

Sethi emphasized the value of the minority-owned businesses that serve the needs of the area’s diverse immigrant communities.

Pakistani immigrant Saifullah Memon has run South Asian grocery store Taj Mahal Fresh Market for nearly 30 years. He stocks fresh goat and lamb meat, tropical fruit like star apples and dragon fruit, and pantry staples rarely found outside the region. His customers come from as far as Monterey and San Ramon. Once the plaza is redeveloped, he doesn’t know where he’ll go.

When Memon and Agustin individually reached out to city staff to ask for aid, as instructed in City Council meetings, staff told them there was nothing the city could do.

“Always the same thing: ‘The landlord has the power,’ they say, ‘Land belongs to the landlord,’” Memon said. “What can you do? Nothing. We cannot do anything.”

Once development begins, Agustin and Memon said, relocation of their businesses will not be easy. They are not able to start planning yet because they don’t know when the city will approve the development proposal.

“All of us are just trying to figure out what’s our best play without having a timeline,” Agustin said. “When does the clock end?”

He has been visiting buildings that are available for lease, planning to talk to his bank about a business loan, and speaking with other business owners in the plaza about potentially combining their businesses in a new location.

All of this comes at a cost. Replacing freezers and refrigerators, obtaining new permits from the city, and retaining employees is a challenge for any business forced to move.

Teresa and Sergio Lopez, who own Angelou’s Mexican Grill in downtown San Jose, relocated the restaurant after they were forced to leave their previous longtime location in 2023, which was planned for development into housing for seniors. They had to keep the restaurant closed for a year while their new permit was pending, digging into savings and credit cards.

“Little by little, it’s like we started a new business again,” Sergio said.

Trudi Ryan, the city’s community development director, said city staff “proactively held meetings with and went door-to-door to the businesses in Fair Oaks Plaza to listen to their business needs and concerns about the proposed project.” She said they encouraged affected businesses to reach out to the city for support, such as help with site selection and the permitting process.

Mehlinger added that he plans to put forth two budget proposals – one to create a relocation assistance fund for businesses in the affected complexes, and another to increase staffing specifically focused on retail retention and development in the city’s Office of Economic Development – and propose a study issue to “develop a citywide retail strategy.”

The staffing proposal and study issue would both “specifically focus on underserved areas such as North Sunnyvale,” Mehlinger said. He plans to propose the budget measures at the end of this month, but all three proposals would be for fiscal year 2026-2027.

Reflecting on the situation, Agustin of Western Pacific recalled a community member emphasizing to other residents how during the COVID-19 pandemic, neighborhood groceries like Western Pacific and Taj Mahal were the ones that “held it down for the whole area.”

At Western Pacific, the shelves were stripped completely clean. Agustin was at the store “non-stop,” working to keep the shelves stocked – which he said even placed a personal strain on his family life.

He also recalled receiving a certificate from Mayor Larry Klein at a City Council meeting in honor of “Small Business Saturday” in 2023.

“To have the mayor say, ‘Look, we’re here to preserve small businesses,’ only to be one of the businesses affected by this – that’s probably one of the worst things to feel on my end,” Agustin said. “That kind of stings.”