leaders, experts – Silicon Valley
SAN JOSE – Downtown San Jose, supported by plans for a revolutionary Google village, a sparkling new Adobe tower, and intense interest from two mega-developers, has come on the cusp of a dramatic transformation.
The largest city in the Bay Area can now be a major player measured by far more than its status as the only municipality in Northern California with a population of 1 million or more.
“The stars align for downtown San José,” San José Mayor Sam Liccardo said in an interview. “They align with public sector infrastructure investments and private sector investments.”
Downtown San Jose is eclipsed in size by downtown Oakland and San Francisco when measured in square feet. Yet other towers have started to sprout in recent times, including several residential towers and two office towers, one built by tech titan Adobe and the other by veteran developer Jay Paul Co. other rounds are in progress.
Public transport links are plentiful, with a rail hub at Diridon Station that connects Caltrain, Amtrak, ACE Train, Capitol Corridor, and the light rail. Two BART stops, including one at Diridon station, are planned, and a high-speed rail line could also someday zoom into the city center.
Years ago, San Jose surpassed San Francisco in terms of population, but despite this claim to fame, San Jose constantly lingers in the shadows of prestige cast by San Francisco.
A population boom ushered in by decades of sprawl and annexation, the proclamation of San José as “the capital of Silicon Valley,” the headquarters of Adobe, better weather, lower office rents and a city more livable, all was not enough for San Jose’s downtown has to be seen as a major urban core with all that other bustling city centers can boast.
But at the end of 2016, the purchase of an old bakery building near the station, followed by a series of purchases of other unpretentious properties in the same neighborhood, became the prologue to a potentially astonishing transformation of the edges. west of downtown.
One of the most famous companies in the world – the titan of Google search – was behind the purchase of dozens of properties needed for a district of offices, homes, hotels, shops, restaurants , cultural centers and open spaces, now known as Downtown West, where the tech giant could employ 25,000 people.
“The news of the demise of downtown in America has been greatly exaggerated, and has been particularly exaggerated in downtown San Jose,” said Mayor Liccardo.
Google’s involvement in such a high-profile fashion has, in turn, sparked a modern gold rush by a multitude of developers, large and small, in the city’s urban core.
“It’s San Jose’s turn now,” said Gary Dillabough, senior director of developer Urban Community. “If we do our job right and create the right environment in San José, downtown will really take off. “
Still, the road to success could be tricky, according to some real estate experts.
Main among the hurdles: Rents for prime office buildings in downtown San Jose did not exceed the threshold of $ 4.25 per square foot per month. Experts estimate that rents would need to be more between $ 5.25 and $ 5.50 per square foot to generate enough rental income to justify the cost of building brand new office space.
Another potential problem is that the economy could fall again as part of a normal up-and-down cycle that has nothing to do with the coronavirus or other extraordinary events, causing demand for consumers to drop again. tenants.
But for now, South Bay’s modest skyline and relatively plentiful above-ground parking and underutilized sites may be among the factors that have caught the attention of a single mega-developer.
Westbank is a real estate company that focuses its efforts in only a few cities rather than the model often presented by global developers who have projects in all markets of a country or continent. Westbank, which has partnered with Dillabough, is now focusing on downtown San Jose.
“What interests me about San Jose is that there is a canvas where we can make a significant impact fairly quickly,” said Ian Gillespie, CEO of Westbank.
Based in Canada, Westbank also prefers to engage deeply in one city rather than building one project and heading to the next market. Besides San Jose, Westbank focused on the Canadian cities of Vancouver and Toronto, Seattle and Japan.
“It’s not a one-off project with a few projects,” said Andrew Jacobson, who leads the Westbank initiative in San Jose. “We will be there for the long term. We put 150% effort into everything we do. We are going deep into a market.
Likewise, Google is looking to make a major positive difference for San José by creating a neighborhood focused on public transportation.
“We have sophisticated players making multi-billion dollar bets on the future of downtown San Jose,” said Mayor Liccardo.
Despite the push towards remote working encouraged by the pandemic, experts believe that city centers will remain in fashion and that office centers will be the main places where employees gather and work.
“The office is no longer just a place where you have a computer,” said Shawn Kellenberger, executive managing director of Newmark, a commercial real estate company. “You have to create offices in a place that attracts employees. “
More and more, downtown San Jose is becoming a magnet for this new type of workplace.
“The office needs to be in a place that has energy, courage, convenience, public transportation and a vibe,” Kellenberger said. “Downtown San Jose has that now.”
In addition to global players such as Westbank and Jay Paul, and tech titans Adobe and Google, local players such as Sobrato Organization, KT Urban, DiNapoli Cos., Urban Catalyst and Dillabough’s Urban Community have entered the market for downtown.
“The momentum is starting to build,” said Shawn Milligan, partner of KT Urban, who proposed the development of a pair of 20-story office towers on the southern edges of downtown near Interstate 280. . “You are starting to see critical mass downtown.