Despite one neighboring restaurant's concerns about construction impacts and being left out of the loop, a trend-setting mixed-use project proposed for Palo Alto's California Avenue cleared a key hurdle this week.

The Architectural Review Board was unanimous Thursday in recommending that the city's planning and community environment director approve a 27,000-square-foot building at 260 California Ave. The ground floor would be devoted to retail with offices located above.

The Hayes Group-designed project would replace Club Illusions, the most recent in a string of nightclubs that have called the site home.

The co-owner of Homma's Brown Rice Sushi, Momoyo Homma, said the dust and noise of construction could cripple her hole-in-the-wall restaurant, which is tucked next door on New Mayfield Lane.

"If the construction keeps going," Homma told board members, "most likely we'll have to close down."

Homma's daughter, Yuri, added that the restaurant wasn't included in a study of potential environmental impacts. The report concluded other businesses in the surrounding area would not be significantly affected.

"Their operation time is going to be 8 to 6 o'clock and that's when we do business," she said. "A truck going back and forth, the dust and the noise, it would be a huge impact for us."

However, senior planner Russ Reich said the developer would have to follow a set of general conditions to limit such impacts. In addition, a screen will be installed between the sites.

"They want to provide a physical barrier to prevent dust from drifting off site, because they're right on top of each other," Reich said.

City officials also noted that the Hommas will have until Jan. 14 to comment on the study and be included in future meetings between the city and developer regarding construction plans.

That appeared to satisfy the board, which otherwise welcomed the project as a sign of things to come on California Avenue. The 37-foot-tall building would feature a recessed ground floor with a colonnade supporting the upper floors. A pronounced roof overhang would do little to disguise its scale.

"I don't have a problem with the height of the building and the massing of the building. If anything, this is a forerunner," said Board Member Lee Lippert. "With the PTOD (pedestrian and transit-oriented development) zone coming in, we're going to see a lot more buildings that are taller, bigger and bulkier than this."

The building would be the tallest structure on the north side of California Avenue for an entire block. But city staff noted that a building located diagonally across the street is about the same height.

In recommending approval of the project, the board agreed to two "design enhancement exceptions" requested by the Hayes Group.

The first would permit a stairwell tower that is 42 feet tall, or the same height as the building's elevator tower. The second would avoid a requirement that the project be set back 20 feet from New Mayfield Lane; the new building would essentially occupy the existing one's footprint.

At the request of the board, the Hayes Group agreed to build bicycle parking on the ground level and add windows to the stairwell.

Email Jason Green at jgreen@dailynewsgroup.com; follow him at twitter.com/jgreendailynews.