Commercial Real Estate in San Mateo: Downtown Retail Rules, Transit Districts and the City Transfer Tax

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

The City of San Mateo’s commercial property runs from the downtown retail core around B Street to the El Camino Real and Twenty-Fifth Avenue corridors, the transit districts around its Caltrain stations, including Hillsdale, the former Bay Meadows racetrack, and office parks east of Highway 101. San Mateo is also the one city in the county that charges its own transfer tax on top of the County’s, and above $10 million it triples. Confirm zoning and tax with the City of San Mateo before relying on this page.

Who controls the parcel

Inside city limits, Title 27 of its Municipal Code is the zoning ordinance, published by the city in its own law library. Several large areas are governed by plans adopted into Title 27: the Rail Corridor Transit Oriented Development Plan, the Hillsdale Station Area Plan and the Bay Meadows Specific Plan. Unincorporated pockets nearby, such as the San Mateo Highlands, may be under County Title 8; see our San Mateo County commercial guide.

San Mateo zoning for commercial, industrial and mixed use

Downtown: the CBD and required retail frontage

Chapter 27.38 aims to keep downtown a center for shopping, culture, entertainment and community services, with pedestrian activity on the ground floor and offices and housing above. The district is limited to properties within a parking assessment district.

• Intensity. FAR is capped at 3.0, structured and surface parking count toward floor area, and parcel coverage can reach 100%. Heights follow the city’s height and bulk overlay and the General Plan’s Building Height Plan.
• Uses. Any C2 use is permitted except animal hospitals and emergency shelters, and apartments are permitted as part of a mixed-use project.
• Retail frontage. Inside the required retail frontage area mapped in the Downtown Plan, ground floors are for retail, personal services, restaurants, theaters and customer-serving banks. A store that does more than half its sales online does not count as retail.
• Corners. Banks are barred at corner locations in the frontage area. Walk-in offices such as real estate or insurance agencies need a special use permit and must stay under 2,500 square feet per building and off corners.
• Frontage percentages. On lots 25 feet wide or less, at least 67% of the frontage to a 60-foot depth must hold those uses, rising to 75% on wider lots, and 75% of new ground-floor walls must be entrances or display windows.

Corridors, transit districts and industrial land

C1 on the corridors. C1 is the neighborhood district found on corridors such as Twenty-Fifth Avenue. Ground-floor offices and banks are capped at 2,500 square feet each, retail stores at 15,000 square feet except supermarkets and drug stores, and drive-through restaurants are not on the permitted list. Separate use limits apply in the Twenty-Fifth Avenue Improvement Area and the Hillsdale Station Area Plan Active Zone.

C2. Hotels, motels, medical clinics with labs, offices and parking facilities are permitted outright, along with housing at R4 density standards.

Transit districts. The TOD district, adopted by Ordinance 2007-3, implements the Rail Corridor Plan, which encourages more intensive development within walking distance of stations; permitted uses are those the plan’s land use chapter assigns. The Hillsdale Station Area Plan is built around a relocated Hillsdale Caltrain station and favors mixed-use, transit-oriented development.

Office parks and industry. E1 is meant for conference, research and administrative uses with accessory restaurants, gyms and day care. M1 permits assembly, testing and repair, medical, research and testing laboratories, contractor shops and warehousing other than flammable liquids. Housing is not allowed in M1 except for on-site security staff.

Lodging and short-term rentals

Hotels are permitted in C2. Under Chapter 5.66, adopted by Ordinance 2021-6, short-term rentals must be registered annually with the city. Unhosted stays are limited to 120 days a year, ADUs cannot be registered, and events such as weddings or corporate functions are barred. Registration ends when the property is sold.

Transfer tax, business tax and property tax

The County Recorder charges documentary transfer tax at $0.55 per $500 of value and notes that property in the City of San Mateo pays an additional city conveyance tax.

City transfer tax. Section 3.48.010, as amended by Ordinance 2022-15, sets the city tax at 0.5% of the consideration or value for transfers under $10 million and 1.5% for transfers of $10 million or more. Unlike the County tax, the city’s measure of value includes debt that stays on the property. Exemptions include certain transfers between spouses and parent-to-child transfers of single-family property.

Collection and penalties. The city’s fiscal director collects the tax, which may be paid through the County Recorder at recording. A late payment draws a 10% penalty and interest of one-half percent a month.

The higher rate applies to the full price, not just the amount above $10 million. In October 2026 the GoCodebook copy of Chapter 3.48 still showed the older flat 0.5% rate, so rely on the city’s own law library. Business tax is in Chapter 5.24; we did not verify rates. A change of ownership generally triggers Proposition 13 reassessment.

Due diligence that matters in San Mateo

Start with our commercial due diligence checklist, then add:

• Price in the city transfer tax, and the jump to 1.5% at $10 million.
• Downtown, confirm whether the storefront is in the required retail frontage area and whether it is a corner.
• For office users on C1 corridors, check the 2,500-square-foot ground-floor cap.
• Near a Caltrain station, read the Rail Corridor Plan or Hillsdale plan standards for the parcel.
• Confirm building height under the General Plan’s Building Height Plan before planning additions.
• For labs, confirm the parcel is M1, E1 or a plan district that allows them.

Questions people ask

Sources & notes

1. City of San Mateo Law Library, Title 27 Zoning
2. Chapter 27.38, CBD District and Section 27.38.110, Required Retail Frontage
3. Section 27.30.010, C1 permitted uses and Section 27.32.010, C2 permitted uses
4. Section 27.44.010, E1 and Section 27.56.010, M1
5. Chapters 27.88, 27.90 and 27.92 (Bay Meadows, TOD, Hillsdale)
6. Chapter 5.66, Short-Term Rentals
7. Section 3.48.010, Real Property Transfer Tax
8. San Mateo County Clerk-Recorder, documentary transfer tax

Note: We read the code through the city’s law library and its published HTML bulk download. We did not read the Downtown Plan, Rail Corridor Plan, Hillsdale or Bay Meadows plan documents, the Building Height Plan, C3, C4 and CBD Support chapters, or business tax rates. The San Mateo Highlands example is not a verified boundary.

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

Related: San Mateo real estate guide · Multifamily property in San Mateo · Commercial real estate services