Commercial Real Estate in Santa Cruz: Downtown, the Beach Area, Industrial Land and Measure C

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

Commercial property in the City of Santa Cruz sits in a few distinct places: the downtown Central Business District along Pacific Avenue and the river, the beach and boardwalk area south of Laurel Street, neighborhood and thoroughfare commercial strips, and a modest stock of general industrial land. Much of the city is also inside the Coastal Zone, and since July 1, 2026 larger sales carry a new tiered city transfer tax. Confirm the district, overlays and coastal status for each parcel with the city’s Planning and Community Development Department before relying on this page.

Who controls the parcel

The City of Santa Cruz is an incorporated city, and its zoning is in Chapter 24.10 of the municipal code. Many district sections are written as part of the city’s Local Coastal Implementation Plan, so a project in the Coastal Zone needs a coastal permit on top of zoning approval. Where an overlay applies, the code says the stricter of the overlay and the base district governs. The city’s overlays include Coastal Zone, Shoreline Protection, West Cliff Drive, Historic, Neighborhood Conservation, Floodplain and Mission Street Urban Design Plan. Unincorporated areas such as Live Oak and Soquel are County jurisdiction; see our Santa Cruz County commercial guide.

Santa Cruz zoning for commercial, industrial and mixed use

Downtown: the Central Business District

The CBD implements the Downtown Plan, a specific plan, and its five subdistricts are the Pacific Avenue Retail District, the Front Street Riverfront Corridor, South of Laurel, the Cedar Street Village Corridor and the North Pacific Area. Chapter 4 of the Downtown Plan, not the zoning text, sets the permitted uses, ground-floor rules and heights, so get that chapter before underwriting a downtown building.

• Demolition control. A downtown demolition permit generally requires approval of the replacement project first, with a narrow hardship exception.
• Lots and parking. New parcels need at least 5,000 square feet. Uses inside Parking District No. 1 can meet parking through the district instead of on site.
• Outdoor dining. Sidewalk extension areas need a revocable license, and curb extension parklets need a design permit and are limited to streets posted at 25 mph or less.
• Recent amendments. The CBD sections were most recently amended by Ordinance 2025-11.

The beach area and the RTC/PER overlay

The Beach Commercial Performance Overlay, which follows the Beach and South of Laurel Comprehensive Area Plan, is one of the most specific sets of rules in the city.

• Retail cap. Retail stores are permitted with a design permit, up to 125,000 square feet across the whole district, with department stores and discount malls excluded. Restaurants may not have drive-up service.
• Special use permit. Hotels with ground-floor shops or restaurants, theaters, nightclubs, galleries, conference space and housing above the first floor.
• Housing. Up to 30 units an acre, with a mix of unit types and 15% affordable units.
• Height. 36 feet, or 48 feet if a quarter of the lot is public or performance space; buildings must be at least two stories, with 15-foot ground floors for retail and entertainment.
• Frontage and design. Buildings come to the property line on Beach Street and Riverside Avenue, parking is screened by 50 feet of commercial depth, and architecture follows Spanish Colonial Revival, Mission Revival or Mediterranean styles.

General industrial land

The I-G district aims to protect an environment for industry and buffer neighbors.

• Permitted. Offices, including medical offices and labs, wholesale, warehousing, printing, repair and small fabrication. Building materials stores under 40,000 square feet are also permitted.
• Administrative use permit. Auto services, boat repair, cannabis businesses and several manufacturing types.
• Special use permit. Larger building materials stores, heavier manufacturing and nightclubs. Multifamily housing can be approved by special use permit under R-M rules.
• Prohibited. Asbestos manufacturing, petroleum refineries and industry supporting offshore drilling.
• Standards. Principal buildings may reach 50 feet, and lot coverage can reach 80%, plus 5% for employee amenity areas. Sites across from residential zones need deeper setbacks. Use lists were amended in 2024 and again by Ordinances 2026-07 and 2026-13.

Transfer tax, business tax and property tax

• City base tax. Chapter 3.32, adopted by Ordinance NS 712 in 1967, sets 27.5 cents per $500 on transfers over $100, administered by the County Recorder. Under the standard state enabling law, a city tax at that rate typically shares the County’s documentary transfer tax rather than adding to it; we did not verify the County rate, so confirm the total in escrow.
• Measure C. Voters approved Measure C, the Workforce Housing Affordability Act of 2025, and its transfer tax took effect July 1, 2026. It applies only to transfers above $1.8 million, in marginal tiers: 0.5% on the portion from $1.8 million to $2.5 million, 1.0% to $3.5 million, 1.5% to $4.5 million and 2.0% above that, capped at $200,000 per transaction. It reaches some changes in ownership of entities that hold property. Exemptions include certain foreclosure-avoidance transfers and homes deed-restricted as affordable for at least 30 years.
• Parcel tax. Measure C also added a $96 annual parcel tax for 20 years.
• Other taxes. We did not verify business license tax or hotel tax rates. A change of ownership generally triggers Proposition 13 reassessment.

Due diligence that matters in Santa Cruz

Start with our commercial due diligence checklist, then add:

• Confirm the district and every overlay, and whether a coastal permit is needed.
• Downtown, read Downtown Plan Chapter 4 for the subdistrict’s uses and heights.
• On a sale over $1.8 million, add the Measure C tier calculation to closing costs.
• In the beach overlay, check how much of the 125,000-square-foot retail cap remains.
• For industrial buildings, confirm whether the intended use needs an administrative or special use permit.
• For downtown redevelopment, plan for the demolition rule that requires an approved replacement project.

Questions people ask

Sources & notes

1. Santa Cruz Municipal Code Chapter 24.10, Land Use Districts (Code Publishing)
2. Part 24, Central Business District (GoCodebook)
3. Part 16, I-G General Industrial District (GoCodebook)
4. Chapter 3.32, Real Property Transfer Tax
5. City of Santa Cruz, Measure C
6. City of Santa Cruz, Measure C information session

Note: We did not read Downtown Plan Chapter 4, the C-C, C-T, C-N, C-B or P-A parts, the Coastal Zone overlay text or the County transfer tax ordinance. Measure C’s municipal code chapter number was not found; rates are from the city’s Measure C page. Who pays Measure C (buyer or seller) is not stated by the city.

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

Related: Santa Cruz real estate guide · Multifamily property in Santa Cruz · Commercial real estate services