The value premium for real estate adjacent to Caltrain stations, which has grown noticeably during the current property recovery, is likely to grow even more after the transit system’s electrification, planned before decade’s end.
While the ultimate service model is not yet determined, Caltrain staff say electrification means more stations from San Francisco to San Jose will get more frequent service, and travel times will be shorter. Both factors are key to increasing ridership, if the system’s experience with its Baby Bullet Express Trains, introduced in 2004, is an accurate predictor.
The 52-mile system, which arguably connects the most important jobs corridor in the state, is already running at or near capacity at certain times of day. Ridership has reached an all-time high, topping 42,000 on average each weekday, based on a physical head count completed in February, C.H. Harvey, the deputy chief executive officer, told the Caltrain board at its most recent meeting. In February alone, the system carried more than a million passengers—up 20 percent year-over-year.
Right now, the system’s Baby Bullet Express Trains—the most popular by far—travel from San Francisco to San Jose in about an hour, with service concentrated during morning and evening commute times. But the trains stop at only a fraction of the stations along the way, including San Francisco’s 4th Street and 22nd Street locations, Millbrae, San Mateo, Redwood City, Menlo Park, Palo Alto, Mountain View and San Jose’s Diridon. “The electric train will make that same end-to-end turn time, but we will be able to stop 14 times,” said Seamus Murphy, Caltrain director of government and community affairs.
“The electric equipment accelerates and decelerates a lot more quickly compared to the diesel service (in place today), and that allows you to stop more frequently and still get end to end in the same time as our Express Trains today,” he said.
The improvements are critical to the region’s economic future, according to letters from executives at Google Inc. and Genentech that urged local political leaders to find the financing for the upgrades before a crucial vote in late March. “ … [T]he Caltrain corridor is the most dynamic and economically productive region in California,” Ariane Coleman Hogan, a senior policy manager at Genentech, wrote. “However, the region’s continued prosperity is constrained by high levels of traffic congestion that challenge Bay Area employers, employees and residents alike.”
John Igoe, Google real estate director, has told multiple audiences of late how critical the company believes Caltrain’s modernization is. “An accessible, efficient transportation infrastructure system is essential to sustaining the type of dynamic environment that allows innovative companies to grow and thrive,” wrote David Radcliffe, a Google vice president of real estate and workplace services, in a letter to the head of the California High-Speed Rail Authority. Caltrain electrification would allow the commuter service and the high-speed rail service to share the same tracks.
Commercial buildings near downtown Mountain View’s Caltrain station garner rents that are 60 percent or higher than those in the same city but without the Caltrain connection, according to a study completed last year on behalf of The Registry by Gregory M. Davies, a senior vice president for Cassidy Turley Commercial Real Estate Services in San Jose.
Davies himself has commuted on Caltrain since 2002 and says the increased ridership cited by agency staff is visible daily. “I haven’t seen standing-room-only since before the ’08 downturn,” he said. “They have figured out that people will ride it if it is comfortable and fast. With the electrification, when they get those new train sets, and it is a nice car that is clean and has Wi-Fi and [electrical] outlets, people aren’t going to ride it once.”
“I am convinced [electrification] is going to increase” property values, he said.
What’s happening in Mountain View may be a preview of what is to come. A part of the Mountain View rent premium derives directly from its station’s status as a Baby Bullet stop, said Brandon Bain, a partner with Cassidy Turley and a leasing agent for the Sunnyvale Town Center.
Mountain View enjoys both morning and evening Baby Bullet service for northbound and southbound travelers, according to the Caltrain schedule posted on the agency’s Web site. The Town Center is on the next stop south of Mountain View—but has no Baby Bullet service for morning commuters who want to travel from the north to jobs in the south.
Apple Inc. is the latest tech tenant to announce that it will occupy a 156,000 square-foot office building at the huge Sunnyvale mixed-use redevelopment, following Nokia Inc., which is already there. The Town Center one day is supposed to have nearly two million square feet of office space, high-density housing, retail and restaurant space and a hotel.
Demand from office tenants looking to be near the Town Center and its Caltrain station is strong—but not as strong as it would be if the station had greater Baby Bullet service, Bain said.
“The advantage that Mountain View has over a regular stop is significant,” he said. The north “is where the sought-after talent pool lives.”
Caltrain ridership fell to its low point in 2004, to less than an average of 25,000 weekday riders. Since the agency introduced the Baby Bullet Express Trains, ridership has risen 65 percent.
Electrification is an upgrade that the system has sought for decades and that it had not expected to have until 2030 or later. The $1.5 billion project got a major boost in late March when the Metropolitan Transportation Commission approved a multi-agency memorandum of understanding that allocated about half the total cost, or $706 million, toward the initiative. The money is to come from high-speed rail sources because the electrification and an accompanying advanced signal system will allow the tracks to serve both Caltrain and the super-fast trains. The rest of the money is to come from local, regional, state and federal sources.
Ron Winter, principal of Danville-based Trumark Commercial, says landlords buy buildings away from public transit at their peril. “Your risk of leasing a building goes up exponentially as you move away from mass transit,” he said. “We purposely look to properties that are close to that line. If your building is close to Caltrain, it is worth a lot more money.”
Trumark has invested $1.3 million to renovate a nearly 66,000 square-foot Sunnyvale building and is emphasizing its Caltrain accessibility (less than a quarter mile away) as one of its key benefits to occupants. Rents in Mountain View range from $2 a foot a month to $4 a foot a month compared to comparable structures in Milpitas that are drawing 60 cent a foot or less a month, Winter said. Milpitas is not on the Caltrain line.
Caltrain, Winter observes, is “strictly a tool.” If electrification makes it a better tool “to get people to and from work quicker, it will make it a more desirable tool,” he said.
Developers are already sniffing around, and many have been keyed into Caltrain’s rising effects, said Mark Simon, executive officer for public affairs for Caltrain as well as the San Mateo County Transit District. More opportunity should come. The agency is anticipating the release of a request for proposals related to property in owns near the Hayward Park station, he said.
Caltrain also owns other parcels where it is eyeballing transit-oriented development, Murphy said. “There will be land in the future available for TOD. It is hard to say exactly when those opportunities will come up, but there are clearly opportunities for developers to partner with us.”