Downtown San Jose development boom seen: real estate experts

SAN JOSE — Downtown San Jose is becoming a magnet to a widening array of tech companies, large and small, that seek urban settings close to transit, according to a panel of commercial real estate experts.

Google’s interest in creation of a transit-oriented village near the Diridon train station, along with low costs for land and office spaces and the prospect of expanding rail connections near relatively plentiful housing, were among the factors cited by the experts making the case for downtown San Jose as a new economic boomtown. The observations emerged during a meeting sponsored by the San Jose office of SPUR, a non-profit urban planning group.

Matthew Lituchy, chief investment officer with Jay Paul, a veteran real estate company that is one of the Bay Area’s most successful developers with big projects in hotbeds such as Mountain View and Sunnyvale, said his company constantly scouts for locales potentially attractive to tech companies.

“We realized that everything we were looking for, an urban setting with plenty of transit, was right here in downtown San Jose,” Lituchy said during a discussion at the SPUR event in San Jose on Jan. 30.

San Francisco-based development firm Jay Paul has done more than look downtown. The developer, whose Silicon Valley tenants include Google, Apple, Facebook and Amazon, is grabbing choice sites in the urban core of the Bay Area’s largest city.

In July 2018, an affiliate controlled by Jay Paul paid $283.5 million for CityView Plaza, a huge complex of offices, shops and restaurants bounded by West San Fernando Street, South Almaden Boulevard, Park Avenue and South Market Street.

A few weeks later, a Jay Paul affiliate paid $46 million for the old JCPenney building at North First and West Santa Clara streets.

“We bought CityView Plaza and that is going to be a major redevelopment at some point,” Lituchy said. “It will be an architecturally significant project. We are really excited about our plans for CityView Plaza.”

Enough projects are being contemplated by developers that downtown San Jose could gain 50,000 to 70,000 jobs if they’re all built, according to estimates presented at the meeting.

That would be more than double the current downtown job base of roughly 43,000, a figure included in a June 2018 report released by the city’s Office of Economic Development.

“We will see growth in downtown San Jose from emerging tech companies along with major tech companies,” said Mark Schmidt, senior managing director for the San Jose office of CBRE, a commercial realty brokerage.

Both Schmidt and Lituchy said they hear from their tech clients that more than a few young tech professionals have become increasingly disillusioned by the prospect of riding in buses for hours a day to reach their offices in big campuses in Silicon Valley.

“Recruitment and retaining talent is the most important thing for a tech company, and their employees want to be in urban environments close to transit,” Schmidt said. “Mega campuses don’t work any longer.” Referring to downtown San Jose, Schmidt added, “More tech companies want to be here.”

San Jose-based Adobe Systems is planning a major expansion of its three-building headquarters campus downtown with the proposed construction of a fourth office tower at an adjacent site, an addition that would accommodate thousands of new tech workers.

The largest single change on the horizon for downtown San Jose is Google’s proposal for a transit village of office buildings, homes, restaurants, shops and open spaces where 25,000 people could work, including 15,000 to 20,000 of the search giant’s employees.

A short distance from the Google areas of interest, Boston Properties, TMG Partners and Valley Oak Partners have teamed up to jointly develop a 1.1-million-square-foot tech campus of three big office buildings that would be perched on the banks of the Guadalupe River.

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