Commercial Real Estate in Pacific Grove: Downtown, Forest Hill, Visitor Commercial and Coastal Rules

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

Pacific Grove’s commercial property is concentrated in a few places. The historic downtown runs along Lighthouse Avenue and the cross streets. Forest Hill sits at the city entrance near Forest Avenue. The visitor district by the American Tin Cannery and Ocean View Boulevard is another, and a small heavy commercial and industrial strip fills in the rest. The City’s commercial zoning chapter was amended twice in 2026, so confirm the district and current use table for each parcel with Community Development before relying on this page.

Who controls the parcel

Pacific Grove is an incorporated city. Its zoning is in Title 23 of the Municipal Code, and commercial and industrial districts are in Chapter 23.31. The edition we read cites Ordinances 26-003 (January 21, 2026) and 26-009 (May 5, 2026). Pebble Beach and the Del Monte Forest, just south, are unincorporated and follow County rules. Monterey borders the city to the east.

Two outside agencies matter. The coastal zone covers part of the city, where the City now issues coastal permits under its own certified program. And on water, the Monterey Peninsula Water Management District must approve new meters or intensified use. Cal-Am, the local water company, is under a state limit on new connections.

Pacific Grove zoning for commercial, industrial and mixed use

District purposes come from Section 23.31.020 and uses from Table 23.31.030 of Chapter 23.31.

District	Intended uses	Notes
C-1 Light Commercial	Neighborhood retail, services and offices, with housing	Retail, offices and mixed use permitted. Multifamily of any size permitted
C-1-T Light Commercial and Hotel	The downtown block bounded by Lighthouse, Grand, Central and Fountain avenues	The only general district where hotels are allowed, by use permit
C-D Downtown Commercial	Retail, restaurants, services, entertainment and upper-floor housing in the historic core	Zero front setback. Mixed use and multifamily permitted
C-FH Forest Hill Commercial	Commercial, service and housing at the city entrance, respecting nearby homes	The only district allowing drive-through restaurants, by use permit
C-2 Heavy Commercial	Service commercial, light manufacturing, outdoor storage, limited housing	8+ unit housing needs a use permit
C-V Visitor Commercial	Tourism-oriented retail, services and institutions	Offices need a use permit. No mixed-use housing
C-V-ATC American Tin Cannery	The Tin Cannery site and the adjacent stretch of Sloat Avenue	C-V uses plus hotels by use permit
I Restricted Industrial	Limited commercial, service and light manufacturing	Retail and offices need a use permit. No restaurants

Across these districts, any building over 40 feet needs a use permit. Side and rear setbacks next to a residential zone are generally 5 feet, or 10 feet in C-V and I.

Downtown, the Tin Cannery and Forest Hill

Downtown (C-D and C-1-T). The downtown core is zoned for ground-level shops and restaurants with housing upstairs. Mixed-use buildings and multifamily housing are permitted outright. That makes upper-floor apartments a realistic value-add for many older Lighthouse Avenue buildings. Chapter 23.34 adds separate limits on certain uses in C-D and C-1-T, and Chapter 23.32 covers condominiums in C-1-T. Review both before you buy.

Historic buildings. Older downtown buildings may fall under the historic preservation chapter (23.76). Ask early whether a building is on the City’s historic register, since that affects facade and demolition plans.

American Tin Cannery. This site has its own zoning, C-V-ATC, under Section 23.31.025. It allows the visitor-commercial uses of C-V plus hotels with a use permit, which sets it apart from the rest of the visitor district.

Forest Hill. C-FH is the city’s auto-oriented commercial area and the only place a drive-through restaurant can be approved. It also has deeper setbacks than downtown.

Alcohol, lodging and short-term rentals

Restaurants with alcohol need an administrative use permit in the commercial districts. Restaurants without alcohol are permitted in most of them.
Bars, taverns and nightclubs are not shown as allowed in any district in the use table we reviewed. Confirm with Planning before pursuing a bar concept.
Hotels are limited to C-1-T and the Tin Cannery site, each by use permit.
Short-term rentals. Under Chapter 7.40, renting a dwelling for less than 30 days needs a City license. The City caps licenses at 250 citywide, allows one per parcel, keeps a 55-foot buffer around existing STR parcels, and limits each block to 15%. Licenses expire March 31, cannot be transferred and need a 24-hour local manager. Unlicensed operation can cost up to $2,500 a day. Don’t count on short-term income from upstairs units without a license already in place.

Coastal permits and water

The Coastal Commission certified Pacific Grove’s full Local Coastal Program on March 11, 2020. The City’s LCP page calls it the city’s first complete certified program. It includes the Land Use Plan and the Implementation Plan in Chapter 23.90, plus an appeal jurisdiction map. For Ocean View Boulevard and other shoreline parcels, expect a City coastal development permit, with possible appeal to the Commission inside the mapped appeal area.

Water is often the deciding factor. The MPWMD water permit page says the District must approve new or larger meters and any intensified use. It may treat a change, like retail to restaurant, as more intense even when the City does not. Cal-Am’s area is also under State Water Board Order WR 2009-0060. Condition 2 of that order restricts new connections and some added use. MPWMD asked in October 2025 to lift it, and the Board held a hearing in 2026, per its hearing notice. Check whether the Board has ruled before you plan a more water-intensive use.

Transfer tax, business tax and property tax

Pacific Grove’s documentary stamp tax (Chapter 7.30, dating to 1967) is $0.275 per $500 on consideration over $100, excluding liens that remain. The County Recorder administers it. Confirm on the escrow estimate how it combines with the county tax.

The business license tax is one mill per dollar (0.1%) of the prior year’s gross receipts, with a $15 minimum and a $3,000 maximum, due July 1. Rent counts as gross receipts. Lodging also pays transient occupancy tax under Chapter 6.09. A sale generally triggers Proposition 13 reassessment.

Due diligence that matters in Pacific Grove

Start with our commercial due diligence checklist, then add:

Confirm the district on the City’s map and read the 2026 amendments to the use table.
For downtown buildings, check Chapter 23.34 use limits and historic register status.
Get MPWMD records of the site’s water use and any credits before changing the use.
For coastal parcels, check whether the site falls in the Commission’s appeal area.
Confirm any existing short-term rental license and that it is not transferable to you.
Confirm business license and TOT registration for each tenant.

Questions people ask

Can I open a bar in Pacific Grove?

The use table we reviewed shows bars, taverns and nightclubs as not allowed in any district. Restaurants that serve alcohol need an administrative use permit. Confirm with Planning.

Where are hotels allowed in Pacific Grove?

Only in C-1-T, the downtown block bounded by Lighthouse, Grand, Central and Fountain, and at the American Tin Cannery site, each by use permit.

Can I add apartments above a downtown storefront?

Generally yes. Mixed use and multifamily are permitted in C-D and C-1. Water availability is usually the harder question.

Does the City issue coastal permits?

Yes. Pacific Grove’s full coastal program was certified March 11, 2020, so the City processes coastal development permits. Some decisions can be appealed to the Commission.

Is there a Pacific Grove transfer tax?

Chapter 7.30 sets $0.275 per $500. Confirm with escrow how it relates to the county tax.

How is the business license tax calculated?

At 0.1% of the prior year’s gross receipts, from $15 up to $3,000 a year.

Does Diamond handle commercial property in Pacific Grove?

Contact Matthew Martinez to discuss buying, selling or leasing commercial property in Pacific Grove.

Sources & notes

Note: Height limits, FAR and parking in Chapter 23.31 were cut off in the text we read. We did not review Chapters 23.32, 23.34, 23.76 or 23.90, the TOT rate, or whether short-term rentals are limited to particular zones.

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

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