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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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.

 

 

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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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Google is gearing up to buy prime San Jose land for a new tech campus. What now?

As the city of San Jose gets ready to release long-anticipated documents related to the sale of 20 acres of land near downtown, the question on the minds of both boosters of the Google expansion and skeptics is “what now?”

The city of San Jose is on the verge of releasing details of a controversial 17-month negotiation to sell 20 acres of publicly owned land to tech giant Google for a massive new campus near downtown.

Those details, set to be released Friday, are a key milestone, but only the first step of making the Bay Area’s largest city one of the next expansion points for Alphabete Inc.-owned Google, a plan that has been met by community members with both excitement, deep disdain, and as of this week, a lawsuit over transparency.

Now, as the release date of the long-anticipated land sale documents near, the question on the minds of both boosters of the Google expansion and skeptics is “what now?”

First, the end goal: Google has said it wants to build a mixed-use campus that could span as large as 8 million square feet and would include housing, retail, and office space next to transit. Somewhere between 15,000 and 20,000 workers could show up each day at the campus if built out fully.

 

 

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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.

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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.

 

 

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Bay Area tops U.S. in new office space, but lags in housing starts

 The Bay Area is a hot place to build cubicles, conference rooms, and office suites. But don’t look for as many hammers pounding out new homes, condos, and apartments.

The region is expected to open 18.2 million square feet of office space in 2018 — tops in the nation and more than New York City and Dallas combined — while home, condo and apartment building has grown only modestly.

More work space, more jobs and more people chasing a limited supply of homes is expected to add more steam to the pressure cooker of the Bay Area housing market.

“It’s encouraging that so many respected employers are investing in Bay Area jobs and immigration growth” said Carl Guardino, CEO of the business-backed Silicon Valley Leadership Group. “But we all recognize that jobs need a place to go home and sleep at night.”

The region created six times as many jobs as housing units between 2010 and 2015, according to a study by the leadership group and the Silicon Valley Community Foundation. The increased housing pressure has forced lower-income workers out of the region at much faster rates than higher paid workers, even as jobs go unfilled.

The run up in commercial development is led by major office openings in the South Bay, according to a survey from real estate data company Yardi Matrix. The big projects in 2018 include the official, complete opening of the 2.9 million square foot Apple Park in Cupertino, Park Tower at Transbay and The Exchange on 16th in San Francisco totaling 1.5 million square feet, and Facebook’s MPK 21, a half-million-square-foot campus designed by Frank Gehry in Menlo Park.

Other major developments underway include the Voyager property developed by Nvidia in Santa Clara, Microsoft and Google projects in Mountain View, the Stoneridge Mall Road project in Pleasanton, and Moffett Towers in Sunnyvale, according to Yardi Matrix.

The real estate data firm estimates that commercial openings in Santa Clara County are up 6.5 percent over the same period last year. The San Francisco and Oakland metro has seen three times as much commercial space open up this year compared to last year.

 

 

Read more on The Mercury News

 

 

Crane Watch update: More than 22,000 residential units have flooded into San Jose’s development pipeline

More than 22,000 new residential units have been proposed in the city of San Jose — the largest city in the housing-starved Bay Area — according to city records and Business Journal reporting over the past year.

Those number have been gathered over the past year and a half and detailed in the Silicon Valley Business Journal’s Crane Watch map, which is a compilation of every large development project that has arrived at the San Jose city hall.

When the Silicon Valley Business Journal’s Crane Watch map launched in 2017, it detailed 30 of the biggest projects in San Jose. But a little more than a year later, the number of projects we’re tracking has ballooned to 107 proposals. These include developments that are anywhere in the city’s development pipeline, from an early vision submitted to the city for feedback all the way to a recently completed structure.

Crane Watch shows industrial, office, residential, hotel, health care, education, retail and mixed-use proposals, and active projects that are 90,000 square feet in size or larger throughout the city of San Jose.

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