Commercial Real Estate in Monterey: Cannery Row, Commercial Districts, Coastal Permits and Water

By Matthew Martinez, Founder, CEO & Managing Broker, Diamond Real Estate Group. California DRE #01869679.

Monterey’s commercial property falls into a few distinct areas. Downtown around Alvarado Street and the wharves is one. Cannery Row and the visitor waterfront is another. The rest sits on the North Fremont Street and Del Monte Avenue corridors, the shopping areas near Munras Avenue, and service and light industrial pockets on the east side. Zoning, coastal rules and water all shape what a buyer can do, so confirm each parcel with the City’s Planning Office before relying on this page.

Who controls the parcel

The City of Monterey’s zoning ordinance, Chapter 38 of the City Code, controls land use inside city limits. Neighboring Pacific Grove, Seaside, Del Rey Oaks and the unincorporated County each have their own codes. Check the city line on corridors like Lighthouse Avenue and Del Monte Boulevard.

Two other bodies matter on most deals. Along the shoreline, the California Coastal Commission has a role, because the City’s coastal program is incomplete (see below). For water, the Monterey Peninsula Water Management District must approve any new meter or more intense use before a building permit issues. Cal-Am, the main water supplier on the Peninsula, operates under a state limit on new connections.

Monterey zoning for commercial, industrial and mixed use

Chapter 38 lists uses as permitted (P) or requiring a use permit (U). A use that is not listed for a district is prohibited. Standards below come from Article 6.

In C-1, C-2 and C-3, retail and full-service restaurants are permitted, while fast food and bars need a use permit. C-3 permits vehicle sales, auto repair, car washes and service stations outright. Offices are permitted in all four C districts and CO.

Cannery Row, downtown and the waterfront

Cannery Row. The CR district carries special rules tied to the Cannery Row Plan and the coastal plan for that area:

• All business activity must be inside enclosed buildings unless a use permit allows outdoor use.
• Within 20 feet of a designated historic structure, new buildings may not rise more than one story or 15 feet above it.
• Shoreline projects cannot extend so far seaward that they need new seawalls or alter the natural shoreline, with narrow exceptions.
• Existing structures over the water must keep at least 13 vertical feet above mean high tide.
• Side yards follow view corridors mapped in the coastal plan, and public access follows its access policies.
• The Planning Commission may relax standards for projects of outstanding design that carry out the Cannery Row Plan.

Cannery Row also has its own business improvement district, set up in Chapter 18, Article 6, which adds an assessment for businesses there.

Downtown and historic buildings. Chapter 38 has a separate article on historic properties, and new buildings go through architectural review under Article 25. Ask the City early whether an older downtown building is on its historic list.

Bars, fast food, mixed use and cannabis

• Bars. A use permit is required. The Planning Commission considers local alcohol-related calls and nearness to sensitive uses. Drive-up and walk-up alcohol sales are banned. Bars operating on May 7, 2002 may continue without a use permit, subject to conditions in Section 38-33.
• Formula fast food. A use permit is required in C-2, C-3 and CR. Outside the SC overlay, sites must be at least 500 feet from schools and parks, not counting the Recreation Trail. Chain logos and standardized looks must be removed or toned down. Turning a local fast-food outlet into a formula outlet needs a new permit.
• Mixed use. Allowed with a use permit in every C district. Commercial or office use must take most of the street frontage. Bars with live entertainment, convenience markets with gas pumps and auto service cannot be part of a mixed-use project. Buildings with three or fewer homes are permitted, and four or more need a use permit.
• Cannabis. The zoning code has a separate Cannabis Business Overlay, and Chapter 19, Article 6 sets a cannabis business license tax. Confirm which sites the overlay maps and what it allows before signing a lease.

Coastal permits and water

The City’s Local Coastal Program page explains that the Coastal Commission certified land use plans for four areas: Cannery Row, the Harbor, Del Monte Beach and Skyline. The Laguna Grande plan was never certified, and the City never prepared an implementation plan. The page describes an update meant to merge the plans and create one. Until the City has a certified program, expect the Coastal Commission to handle coastal development permits in the coastal zone. Confirm the current status for your parcel.

Water is often the bigger obstacle. The MPWMD water permit page says a District permit is needed to set or add a meter, change meter size or intensify use, and the District may treat a space as a change of use even when the City does not. Turning retail into a restaurant is a common example. Cal-Am’s service area is also under State Water Board Order WR 2009-0060. Condition 2 of that order restricts new service connections and some increased use at existing addresses. In October 2025, MPWMD asked the Board to lift that condition, and the Board held a hearing in 2026, according to its notice of public hearing. Check whether the Board has ruled before you price a project that needs more water.

Transfer tax, business tax and property tax

Monterey has its own real property transfer tax in Chapter 35, Article 4. Section 35-24 sets it at $0.275 per $500 of consideration over $100, excluding liens that remain. The County Recorder administers it under the state Documentary Transfer Tax Act. City taxes of this kind are usually credited against the county tax rather than added on top, so confirm the total on the escrow estimate.

Businesses pay a City license tax under the schedule in Chapter 19, Article 2. Lodging also pays transient occupancy tax under Chapter 35, Article 3. A sale generally triggers Proposition 13 reassessment.

Due diligence that matters in Monterey

Start with our commercial due diligence checklist, then add:

• Confirm the district and any overlay (SC, AP, D, MF, cannabis, historic) on the City’s zoning map.
• Get MPWMD’s records for the site’s water use and any water credits, and ask whether your use counts as an intensification.
• For Cannery Row and harbor parcels, confirm whether a coastal permit goes through the City or the Coastal Commission.
• For a bar, confirm the use permit or whether the May 7, 2002 grandfathering applies.
• Check historic status before planning facade or structural work downtown.

Questions people ask

Sources & notes

1. Monterey City Code Chapter 38, Article 6, Commercial Districts (GoCodebook, October 2026 edition)
2. Chapter 38, Article 16D, Cannabis Business Overlay (index)
3. Chapter 18, Article 6, Cannery Row Business Improvement District (index)
4. Chapter 35, Article 4, Real Property Transfer Tax
5. Chapter 19, Article 2, Schedule of License Taxes (index)
6. City of Monterey, Local Coastal Program
7. MPWMD, Water Permits
8. State Water Board, notice of public hearing on Cal-Am orders (June 19, 2026)

Note: The City’s coastal program page is dated and describes a 2017 target for the update; current status was not confirmed. We did not review the VAF, I-R, cannabis overlay or historic article text, the TOT rate, license tax rates or BID assessment amounts.

This page is general information, not legal or tax advice. Last reviewed October 2026 by Matthew Martinez.

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