Commercial Real Estate in Gilroy: Downtown Districts, Highway Commercial and the Growth Boundary

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

Gilroy’s commercial property ranges from the historic storefronts on Monterey Street to regional retail and highway services near U.S. 101, auto and service businesses in the commercial-industrial district, and light and campus industrial land on the south and east sides. Growth is shaped by a voter-approved urban growth boundary, so land supply at the edges is fixed in a way it is not in most South Bay cities. Confirm the district and any downtown sub-district for each parcel with the City of Gilroy Planning Division before relying on this page.

Who controls the parcel

Gilroy is an incorporated city, and Chapter 30 of the Gilroy City Code is its zoning ordinance, largely restated by Ordinance 2013-08 on August 5, 2013. The 2040 General Plan, adopted November 2, 2020, explains that an urban growth boundary approved by voters in November 2016 reduced the areas the city could grow into. It also directs growth first to vacant and underused land inside the urban service area, which LAFCO must approve before it changes. Land outside the city, including the farmland toward San Martin and the hills to the west, is under County zoning; see our Santa Clara County commercial guide.

Gilroy zoning for commercial, industrial and mixed use

District	Intended uses	Notes
PO Professional Office	Offices	Housing by use permit
C1 Neighborhood Commercial	Neighborhood retail and services	Bars, liquor stores and gas stations need a use permit
C3 Shopping Center Commercial	Shopping centers, auto sales, hotels	Housing generally on the second or third floor
HC Highway Commercial	Highway-serving uses near freeway interchanges	Hotels and gas stations permitted
CM Commercial Industrial	Auto, service and heavy commercial	Auto body and tow yards by use permit; emergency shelters permitted
DHD, DED, CCA, TD, CD, GD (Art. XIV)	Downtown Specific Plan districts	FAR from 0.75 to 2.5
M1, M2 Limited and General Industrial	Light and general industry	Use table in Sec. 30.23.10
CI Campus Industrial	High-tech industry and employment centers	Higher architectural and landscaping standards

Use rules for PO through CM come from the commercial tables in Article XIX, where uses are marked as permitted, conditional with a Planning Commission permit, or temporary.

Downtown Gilroy: six districts with different jobs

Article XIV divides the Downtown Specific Plan area into six districts.

Downtown Historic District (DHD). The mixed-use core, with premium retail and entertainment, encouragement for historic architecture and adaptive reuse, and no parking allowed in front of street-level retail. FAR is 2.5.
Downtown Expansion District (DED). Extends downtown retail and mixed use for local shoppers at 2.5 FAR, with parking screened from the street. Drive-through restaurants are permitted here and in the Gateway District, but not in the historic core.
Civic/Cultural Arts (CCA). Civic uses, green space and events; industrial, retail and service commercial uses are prohibited.
Transitional District (TD). A buffer to the western neighborhoods that allows homes to be converted to commercial use, at 1.5 FAR.
Cannery District (CD). Mixed use, live/work and an arts emphasis at 2.0 FAR.
Gateway District (GD). The main entry to downtown, with offices, services and housing, at 0.75 FAR.

Housing above shops. In DHD and DED, residential units must be above street level and cannot front the street. Mixed-use housing in DHD, DED and CD must reach at least 20 units per acre.

Wine, beer and bars. Wine tasting rooms and microbreweries need an administrative downtown use permit in DHD, DED and CD, while bars generally need a conditional use permit downtown.

Vacant downtown storefronts

Gilroy has an unusual rule for downtown owners. Chapter 5D, adopted by Ordinance 2012-02 on February 6, 2012, covers street-level commercial space in DHD and DED that has been empty for 90 consecutive days.

Registration. Owners must register a vacant space within 10 days, pay a $120 fee and renew by January 1 each year.
Window treatment. After 90 days, ground-floor windows need displays such as faux merchandising, art or other approved treatments that screen the empty interior.
Penalties. Each day of violation is a separate infraction, and owners and tenants are jointly liable.
Sunset. The chapter is tied to the life of the city’s 2011 seismic safety ordinance unless the Council extends it, so confirm whether it is still in force.

Highway commercial, auto uses and industry

Hotels. Permitted in C3, HC and CM, and downtown in DED and GD.
Auto sales. Permitted in C3 and CM, with indoor-only sales allowed in DHD. Car washes are permitted in C3 and CM.
Alcohol. Bars and off-site liquor sales are permitted in C3, HC and CM, subject to police chief review of new state licenses, and need a use permit in C1 unless food is the primary use.
Housing in commercial zones. In C1 and C3, a unit attached to an existing business is permitted, but more than one unit needs a use permit.
Campus industrial. CI is meant for high-tech industry and local employment centers so residents can work near home, with design standards at commercial levels.

Visitor lodging pays the transient occupancy tax under Chapter 25A.

Transfer tax, business tax and property tax

The Gilroy code index we reviewed lists sales, use and cigarette taxes under Chapter 22 but no city real property transfer tax chapter, so only the County documentary transfer tax appears to apply. The County Ordinance Code Div. A30, Ch. III sets that tax at $0.55 per $500 of value; check the escrow estimate. A change of ownership generally triggers Proposition 13 reassessment. We did not verify business license requirements or rates.

Due diligence that matters in Gilroy

Start with our commercial due diligence checklist, then add:

Identify the downtown district; FAR and use rules change from block to block.
For a vacant downtown storefront, check Chapter 5D registration and window display compliance.
Confirm whether a bar, tasting room or liquor store needs a use permit or downtown administrative permit.
At the city edge, confirm the parcel is inside the urban growth boundary and urban service area.
Check older downtown buildings for seismic retrofit history.
For industrial land, confirm M1, M2 or CI permissions in Sec. 30.23.10.

Questions people ask

What is the largest building allowed downtown?

DHD and DED allow 2.5 FAR, the highest in the Downtown Specific Plan; height comes from the city’s commercial standards table.

Do I have to register a vacant downtown storefront?

In DHD and DED, Chapter 5D requires registration within 10 days of vacancy and a $120 annual fee. Confirm the chapter has not sunset.

Can I open a wine tasting room downtown?

In DHD, DED and the Cannery District, with an administrative downtown use permit.

Are drive-throughs allowed in downtown Gilroy?

Only in the Downtown Expansion and Gateway districts.

Can Gilroy expand into surrounding farmland?

The voter-approved 2016 urban growth boundary limits that, and urban service area changes need LAFCO approval.

Does Gilroy have a city transfer tax?

We found no city transfer tax chapter in the code index; the County tax applies. Confirm in escrow.

Does Diamond handle commercial property in Gilroy?

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

Sources & notes

Note: We did not review the commercial and industrial site standards tables (heights, setbacks), the M1 and M2 articles, the seismic safety ordinance or business license rules. The absence of a city transfer tax is based on the code’s table of contents. Location descriptions are general.

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

Inquire about a listing or to schedule a meeting

Matthew Martinez

Your inquiry is processed through our iHomefinder service. Review the form’s contact choices before submitting. Privacy Policy · Terms of Use.