By Meghan Hall
The developers of an urban transit village next to San José’s soon-to-open Berryessa BART Station introduced an updated proposal at the end of September 2018 that would significantly increase the amount of residential units and commercial office space in San José’s Market Park neighborhood. Updated plans for the site would increase the number of residential units from the remaining 1,818 residences to 3,450, and the current remaining approved 210,000 square feet of commercial space to between 1.5 and 3.4 million square feet of commercial, office and retail space. The amendment of the project’s existing entitlements, carried out by San José-based firms Borelli Investment Company and The Schoennauer Company on behalf of the site’s owner, the Bumb family, comes at a time when major technology companies are planning years ahead and seeking out large quantities of office space within walking distance of mixed-use developments and transportation hubs.
“If you think about it, this is a very unique opportunity to have this quantity of space that is a mixed-use development on a BART station under one ownership,” explained Ralph Borelli, the chairman of Borelli Investment Company and the project’s broker. “We have the opportunity to provide market-rate housing as well as workforce housing and affordable housing right at the BART station. If there’s an employer out there looking for a solution with traffic and the cost of housing, we have it.”
The updated plans also include three flex blocks, located along the north perimeter of the site that can be designated as either office or residential space, depending on market conditions. According to Borelli, the team also reworked the plaza adjacent to the BART station and expanded its size in response to comments from the San José Planning Department. Ground-floor and stand-alone retail will be located around the edges of the courtyard in a manner similar to Santana Row, according to Borelli.
North of Berryessa Road, 1,000 units are already occupied or under construction. The North Village of Market Park, a 100,000 square foot retail center, secured Safeway as its anchor tenant in July of 2018; construction on the retail center is scheduled to start in the fall of 2019, and the center is expected to open in 2020.
While San José’s office and retail markets are strong, tenants are still methodical in their approach to where and when they rent space. Often, retailers and businesses will wait for residential development to begin before formally signing a lease agreement.
“Retail follows rooftops,” said Borelli of Safeway’s commitment to the new retail center and the general mentality of office and retail tenants in today’s market. Borelli said he had been working with Safeway on renting the space for close to 10 years. Borelli also added that the inclusion of a new freeway interchange—to be located at Mayberry Road and U.S. Highway 101—will be critical in attracting future office and retail tenants.
“The residential is a proven market because we’ve already got 1,000 units done,” continued Borelli. “You don’t have any office out here in this market place, and it’s our position that we need that interchange built in order for this to become a viable office market. “It’s great to have BART, but we’re not directly on top of an interchange, which an office tenant typically wants.”
Borelli said that the developer has already invested $13 million into the interchange, with an additional $8 million on its way. Although the interchange is already part of San José’s General Plan as one of many infrastructure improvements, the City had yet to move forward with construction of the interchange.
“We’ve brought a greater sense of urgency,” explained Erik Schoennauer, owner of The Schoennauer Company, and the land use consultant in charge of the entitlement process. “The number one thing we’ve heard from the brokerage community is that there must be better access or there will be no office.”
According to Borelli, the team is looking to pre-lease the office space, which includes several five-story towers, and will finish the office space out in a build-to-suit manner. The development team predicts that the tenants are likely to be growing technology companies, given San José’s central place in Silicon Valley.
Both Schoennauer and Borelli estimated that the development will break ground three to four years from now, and build-out will last six to 10 years, depending on market conditions.
The development will rise on the site of the current San José Flea Market, a popular destination in the Bay Area for shopping and dining. Schoennauer says that the development team has submitted an RFP to move the flea market to the nearby Santa Clara fairgrounds.
“We would bring regular activity through our public market to the site while maintaining all of the existing community events that happen there,” explained Schoennauer. “It would really become a hub of community activity instead of being closed and inactive most days of the year like it is now.”
In the meantime, however, the San José Flea Market will remain where it is, and the development team hopes to leverage the market’s proximity the Berryessa BART Station to attract new visitors to the market. The station is expected to open in the third quarter of 2019.
“The flea market is open for business and will remain open for business for quite some time,” said Schoennauer. “The flea market is a very successful business, and we’re looking forward to capitalizing on the opening of the BART station late next year to bring more customers to the flea market.”