By Nancy Amdur
Developers are clamoring for a piece of the growing Redwood City market with nearly 500,000 square feet of new office projects proposed for its downtown district just last month, according to the city’s community development department.
In fact, so much space was proposed that, if approved, it would exceed the amount permitted under the city’s Downtown Precise Plan, said Aaron Aknin, the city’s community development director.
“There’s an overall office cap that we’ve hit as a result of these projects,” Aknin said.
Five projects for Redwood City’s downtown market, comprising 489,000 square feet, were submitted in the span of a few weeks, creating about 173,000 square feet of office space on the docket above the allowed square footage, he said. Another 90,000-square-foot office project will be submitted in the next six weeks, Aknin added.
“It’s a unique situation to be in,” he said. “We went from 50 percent allocation to over 100 percent allocation in a short time.”
“[Redwood City has] a dynamic downtown area, and that coupled with Caltrain access makes it desirable,” said Mark Murray, a principal at Menlo Park-based Lane Partners, which submitted plans in August to build a 180,000-square-foot office and retail property at 2075 Broadway.
Lane Partners’ six-story building will include about 5,000 square feet of retail space and two levels of below-grade parking with 147 stalls, according to the Redwood City community development department.
It will feature a neoclassical design to “exemplify the historic nature of that area and some of the surrounding buildings,” Murray said, adding that the company expects a broad range of tenants to be drawn to its property.
This will be Lane Partners’ second Redwood City property. The company previously owned the building at 305 Walnut St., which is leased to the technology firm Evernote Corp.
“I think that you’re going to see Redwood City both in terms of reputation as well as market rents [to] start increasing and looking a lot more like Mountain View and Palo Alto over time,” Murray said.
Also among the proposed projects is a plan by Dostart Development Company to replace 12,820 square feet of older commercial buildings and surface parking with a new 136,500-square-foot office building at 601 Marshall St. Amenities will include an outdoor terrace integrated into the top office floor, providing usable indoor-outdoor space, said Mollie Ricker, a principal at Dostart.
Dostart foresees a variety of firms suited for its space.
“We are designing a project that will be flexible and exciting for cutting-edge technology clients and other office users who enjoy being right in the heart of the downtown experience,” Ricker said.
This will be the Palo Alto-based developer’s first Redwood City property. “We believe that its vibrant atmosphere and transit-orientation will make it a resilient market with a strong diversity of tenant demand over the long term,” Ricker said.
Developers are drawn to Redwood City in part due to its precise plan, which includes guidelines that allow entitlements to be completed within three or four months, while more typically it could take a year to gain planning department approvals, said Jeff Badstubner, a vice president at Sequoia Realty Services in Redwood City.
An upgraded downtown core and increased demand for office space also have helped drive up office rents in recent years, so developing more space makes economic sense, he added.
Downtown Redwood City’s office vacancy rate was 2.34 percent with an average asking rate of $4.14 per square foot as of August 1, according to a report by Colliers International. Further, the town’s overall office vacancy rate dropped from 15.3 percent to 8.48 percent from the second quarter 2013 to the second quarter this year, according to a report by Cornish & Carey Commercial Newmark Knight Frank.
Other Redwood City office projects submitted for review last month include a 70,000-square-foot property at 550 Allerton St. by Premia Capital; a 70,000-square-foot property, including 55,000 square feet of office, at 815 Hamilton by Harmony Capital LLC; and a 61,000-square-foot project at 30 California St. by Windy Hill Property Ventures.
Also included in Redwood City’s office pipeline is Los Angeles-based Kilroy Realty Corp.’s Crossing/900 project, featuring 300,000 square feet of office space. The property, under construction adjacent to the Caltrain Station on Middlefield Road, was leased this month to cloud-storage firm Box, Inc.
If all proposed office projects are approved, there would not be enough room under the plan to issue building permits, according to a report by the city’s community development staff. Among the staff’s proposals to accommodate the surge in office projects is a precise plan amendment to transfer some of the retail and/or housing allocation to office use, Aknin said.
City staff also recommended allowing a developer with a complete project application to reserve a place in line towards a building permit. That project would then be counted under the Downtown Precise Plan, Aknin said. The development department expects to further study options and bring them to the city council for approval in January.