Downtown San Jose, Oakland opportunity zones attract investors, spur development plans amid Google effect

Developers eye projects in downtown San Jose and parts of Oakland, bolstered by tax incentives keyed to opportunity zone.

Developers and a new crop of investors are eyeing projects in downtown San Jose and parts of Oakland, bolstered by opportunity zones enabled by President Donald Trump’s tax-cut initiative.

Potentially the first project in a local opportunity zone would be development of a brand-new office and retail complex on South First Street in downtown San Jose at the site of the old Lido night club, said Erik Hayden, president of Urban Catalyst, a company that as formed an opportunity fund that would provide cash for selected developments in designated areas.

“These opportunity zones are ways to create greater economic activity in lower-income areas,” Hayden said. “They were originally presented to the Obama Administration but didn’t get a lot of traction. Then they became part of President Trump’s tax cuts and jobs act. San Jose Mayor Sam Liccardo very successfully lobbied Gov. Jerry Brown to get downtown San Jose included.”

Investors who plunk down cash for an opportunity fund can “defer or eliminate federal taxes on capital gains,” according to information on the state’s Department of Finance site.

The Lido night club site, currently a two-story building at 26 and 30 S. First St., is now owned by a partnership led by Gary Dillabough, who has emerged as one of downtown San Jose’s most active realty investors and developers. Among the properties Dillabough-headed groups have bought: the nearby Bank of Italy building, a historic office tower at the corner of South First and East Santa Clara streets.

 

 

 

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Big downtown San Jose housing towers, retail, restaurant complex pushes ahead

A big development that will bring downtown San Jose two striking residential towers containing more than 600 dwellings, along with spaces for a restaurant, coffee shop and retailers, is slated to push ahead with construction this month, according to a realty executive.

Miro is a housing high-rise that would dramatically reshape San Jose’s skyline and become its tallest towers.

The project has gotten through a three-month delay after workers hit an aquifer and water poured into the construction site, creating a large pond that had to be controlled and pumped out.

Now that project developer Bayview Development Group has vanquished the water woes, contractors are expected to begin pouring the surface concrete slab within the next few weeks, a necessary prelude to construction of the vertical components.

 

The development would include two towers that each will rise 28 stories and will also offer 18,000 square feet of commercial space, including enough room for a sit-down restaurant, a coffee shop and other retailers.

 

The project fronts on East Santa Clara Street as well as the corners of North Fourth and North Fifth streets. It’s right across the street from San Jose City Hall.

 

 

Read more on East Bay Times

 

 

San Jose moves toward ordinance limiting Section 8 discrimination

Landlords in San Jose would no longer be able to advertise that they don’t take rental vouchers.

San Jose took a step toward making it harder for landlords to turn away would-be tenants who use vouchers to help pay the rent.

This week, the San Jose City Council directed the city attorney’s office to draft an ordinance aimed at giving renters with subsidies, commonly known as Section 8 vouchers, a fair chance on the private rental market. The so-called source of income ordinance would not force landlords to take the vouchers, but it would ban them from judging potential tenants who use subsidies differently from those who don’t and from explicitly advertising “No Section 8” on apartment listings.

If everything goes according to plan, the council will vote on the ordinance in the spring.

While a number of landlords blasted the proposal, saying it would force property owners to navigate convoluted regulations and paperwork, the city’s Housing Department said an ordinance is necessary to make sure families are able to find affordable housing.

Right now, there’s no law that prevents landlords from turning away voucher holders, and a city survey found most do, leaving low-income families scrambling to find homes in one of the nation’s tightest housing markets. Several national studies suggest that when cities and states have such ordinances in place, the percentage of landlords turning away voucher holders goes down and more people with vouchers are able to find places to rent.

“Voucher discrimination is happening in San Jose,” said Jacky Morales-Ferrand, the city’s housing director.

Several landlords told horror stories about Section 8 voucher holders who left rental units in bad shape. But tenants and tenant advocates countered that there’s no evidence voucher users are any better or worse than people who don’t use subsidies.

“We can’t judge the actions of a few and put it on the majority of the people,” said Robert Aguirre, who has used vouchers. “Not all Section 8 holders destroy property or disrespect the people around them.”

“We see clients all the time who are not able to rent housing, have to move away from San Jose, have to live in cars. … it’s absolutely heartbreaking to see that and this ordinance would help,” said Nadia Aziz, an attorney with the Law Foundation of Silicon Valley.

 

 

Read more on East Bay Times

 

 

Public has great expectations for San Jose’s Diridon Station amid Google campus plans

City transportation planner: “This will be the only place in the Bay Area where you have so many transportation modes converging in the same place.”

In discussing his hopes for what will be the new Diridon Station in San Jose, Joint Venture Silicon Valley CEO Russell Hancock fretted about ending up “with is something that isn’t bold, visionary, and exciting…instead, we’ll end up with some common-denominator solution that nobody really loves but nobody objected to either.”

If the couple of hundred people who showed up Monday night for the first community input meeting on the Diridon Integrated Station Concept Plan are reflective of city residents as a whole, Hancock should have no worries.

One commenter said he expected “the most impressive train station in the world, the one people in other places will come to see to model theirs after.”

“This will be the only place in the Bay Area where you have so many transportation modes converging in the same place,” said Eric Eidlin, the city transportation modes converging in the same place,” said Eric Eidlin, the city transportation department’s station planning manager. “That’s one of the main reasons why our city’s policy framework seeks to concentrate a lot of the urban development that we’re expecting right around the station.”

 

 

Read more on the Silicon Business Journal

 

What Google’s San Jose project means for downtown

For years, much of the area around Diridon Station has been a neglected jumble of grimy auto body shops, vacant lots overgrown with weeds and shabby warehouses.

Google — whose plans face a critical City Council vote Tuesday — is expected to transform some 50 acres into a mix of offices, shops and restaurants connected by pathways that wind through parks and plazas filled with public art. Steps away, Diridon is set to undergo its own renovation and become the only place in the Bay Area where BART, Caltrain, Amtrak and high-speed rail converge.

It’s a tall order. But if the tech giant succeeds, the project could transform a downtown that has struggled to rebound from sprawling development in the 1950s and 1960s, when city manager Dutch Hamann rapidly annexed land at the city’s fringes while neglecting its urban core. When it’s complete, the area could support more than 25,000 workers, a 65 percent increase in the number employed in the core of the city today.

For longtime restaurateur and downtown business owner Steve Borkenhagen, Google’s foray into San Jose might finally spark the kind of urban rejuvenation he’s dreamed of for decades. For Kathy Sutherland, a nearly 40-year resident of the Delmas Park neighborhood in the shadow of the proposed development, the project brings both the long-sought possibility of a vibrant neighborhood and the fear of displacement. And for the urban studies theorist Richard Florida, the project is less personal but no less important — a chance for a major American city to finally get redevelopment right, to provide an antidote to the debacle of the Amazon HQ2 rollout.

It will be years before any such dreams or fears are fully realized, but the sale of more than $100 million dollars of city land — expected to be finalized at the Tuesday council meeting — sets the stage for planning and development to begin in earnest after months of closed-door talks and speculation about the biggest thing to happen in San Jose in generations.

 

 

Read more on the East Bay Times

 

 

Billion-dollar deal: Google pays $1 billion for huge Mountain View business park

In a head-spinning mega-deal, Google has paid $1 billion for a huge Mountain View business park, the Bay Area’s largest real estate purchase this year.

It is also the second-largest property purchase in the United States this year, eclipsed only by another Google acquisition, the $2.4 billion the company paid for Chelsea Market in Manhattan.

The newly acquired site in Mountain View, where Google has been the primary tenant, is larger than the property that accommodates the company’s Googleplex headquarters a few blocks to the west, and also exceeds the size of the parcel across the street where Google is building an iconic “dome” campus that features canopies and tents.

“Wow. What a deal,” said Chad Leiker, a first vice president with Kidder Mathews, a commercial real estate firm. “This is an opportunity for Google to own more office space very close to their headquarters. That office space is becoming very rare in Mountain View.”

Google’s Mountain View purchase means that in the two years since the search giant began to collect properties in downtown San Jose for a proposed transit village, the company has spent at least $2.83 billion in property acquisitions in Mountain View, Sunnyvale, downtown San Jose and north San Jose alone.

 

 

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Downtown San Jose developer drops hotel, apartments from massive Museum Place project

The developer behind Museum Place, a 1.4 million-square-foot downtown San Jose mixed-use development and Tech Museum expansion, is simplifying the project, shedding the previously planned hotel and residential units in the project.

Plans submitted this week to the city of San Jose show that investor and developer Gary Dillabough, who took over the project from Insight Realty earlier this year, is looking to reconfigure the previously approved tower by increasing the office space from 250,000 square feet to 850,000 square feet on the 2.3-acre site at 180 Park Ave., where Parkside Hall currently sits.

“The reality of the situation is that when you are trying to build a hotel, residential space and office, you can’t do all three in a world-class fashion, and our belief is that we want to build a world-class office tower,” Dillabough told the Business Journal in an interview Thursday morning.

That means the previously planned 184-room Kimpton Hotel and the 306 residential units that San Jose-based Insight Realty had gotten approved by the city last year would be no more. The project is now estimated to rise to about 19 stories — down from the currently approved 24 stories — and would still include parking and between 15,000 square feet and 20,000 square feet of retail space on the ground level.

Dillabough, who has become a major property owner in Downtown San Jose over the last year-and-a-half after setting off on a buying spree in the area, says he is still interested in hotel and residential projects in the city, just not at Museum Place.

“We still think the city needs housing and hotel uses, but we think they would be better in standalone buildings,” he said.

Read more on Silicon Business Journal

Is Silicon Valley going to change the way we build CRE?

From the end of World War II in the mid-1940s until just a few years ago, there was a surge in productivity throughout the United States economy, giving rise to what has often been called the “productivity miracle.”

Throughout this period, nearly every industry in the US — from retail to manufacturing to agriculture — became not only less expensive, but also much more mechanized and faster, leading to increased efficiency.

One industry, however, failed to come on board with this trend – construction. In fact, productivity in construction has not only not increased, but it is also actually lower today than it was in the late 1960’s.

In other words, the way that most commercial real estate buildings are built hasn’t changed much in the last 50 years or so. The process goes by the name “design – bid – build” – but it isn’t nearly as simple or straightforward as it sounds. First, the developer or owner needs to hire an architect, who drafts a rough design. In order to do this, he or she must bring in various outside consultants, such as structural engineers and landscape architects. Next, the owner puts the design out for bids from various general contractors and then hires one (usually the least expensive bid). From there, the general contractor subcontracts the work out, with the architect and the general contractor working together closely to make sure the project is completed as close as possible to budget and on schedule.

If the system sounds complicated, well, that’s because it is. Having so many cooks in the kitchen, so to speak, often leads to misunderstandings, placing blame on others, or worse. The combination of volatile prices for materials and an observed shortage of skilled labor has created an industry that is primed for disruption.

 

 

Read more on NAI Global

 

 

 

Why Hudson Pacific’s development plans near San Jose airport could be a big deal

The nine-story development would add to the developer’s already extensive portfolio in North San Jose, an area of the city that’s experiencing a flurry of commercial real estate activity.

Hudson Pacific Properties Inc. is looking to expand on a slew of existing office campuses it owns near Mineta San Jose International Airport by building a nine-story office building paired with a big parking garage.

The Los Angeles-based developer submitted a proposal to the city of San Jose last month that lays out a plan to build a new 350,000-square-foot office building and a 1,052-spot, five-story parking garage on 5.29 acres along Technology Drive that are vacant. A single-story office building appears to be attached to the proposed garage in a rough rendering that was submitted to city planners in September.

Hudson Pacific is calling the project “Cloud 10.” The site at 1601 Technology Drive is already entitled for either a 350,000-square-foot office or a 400-room hotel, per a city-approved general development plan for the land. It appears Hudson Pacific has opted to go with office space over the hotel.

 

Read more on Silicon Valley Business Journal

 

 

Milpitas’ Great Mall unveils major revamp as Silicon Valley shopping centers up the ante

As retail sputters in some places around the country, Silicon Valley retailers and property owners are facing a different challenge: How to compete in a market where investment is still hot in the retail sector.

The Great Mall in Milpitas is one of those looking for a competitive edge in a region where the traditional malls are either going by the wayside or upping the ante to create a space that offers not just shops, but experiences.

Indianapolis-based Simon, an international shopping center and mixed-use property owner, last month wrapped up an extensive, two-year renovation project for the massive shopping center, which has more than 200 stores. (For fun facts about the revamp, click through the slideshow above.)

The revamp added or expanded some of its stores, but also redesigned what it is calling a “dining pavilion” that has 10 restaurants.

“Our goal is to provide the best shopping and entertainment experience for our guests and this transformative renovation makes that possible,” Angela Pyszczynski, general manager at the Great Mall, said in a statement.

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