San Francisco’s skyline is not the only one in the Bay Area undergoing serious transformation during these booming economic times. San Jose’s is as well.
But unlike the fast-and-furious office development gripping downtown San Francisco, a residential wave is literally rising high above San Jose’s business core.
Just this month, construction formally broke ground on San Jose’s biggest high-rise housing project in terms of the number of dwellings planned—the 643-unit, twin-building Silvery Towers at North San Pedro and West St. James streets downtown. This project is among a number of residential towers built in recent years, currently under way or proposed in a city looking to add 10,000 condominium or apartment units downtown in relatively short order.
San Jose appears on good pace to meet that goal thanks to several drivers, including the Bay Area’s robust technology-fueled economy, a response to a regional housing shortage amid continued employment growth, increased investor interest in downtown and the city’s own incentive programs that have been part of an effort to remake the central business district a vibrant, walkable mixed-use neighborhood.
“San Jose is the urban center of the South Bay,” said Kim Walesh, the city’s director of economic development and chief strategist. “This is the only place south of San Francisco that you can have the urban high-rise living.”
And that kind of living is much less expensive than in San Francisco. “Downtown San Jose offers an urban lifestyle without the San Francisco price tag,” Alan Mark, president of the San Francisco-based urban residential marketing and sales firm The Mark Company, said in an email.
Downtown San Jose also provides “easy commute access throughout the South Bay” via the Santa Clara Valley Transportation Authority, Caltrain, other public transit systems and freeways, Mark said.
Such factors drew the developers and investors behind Silvery Towers to downtown San Jose.
“If you look at the job growth and economy in the Bay Area, a lot of the high-tech companies are moving from suburban places to downtown areas in San Francisco and San Jose,” said Mike Liu, general manager for San Francisco-based Full Power Properties LLC, which is developing Silvery Towers in partnership with Cupertino’s KT Properties.
“We are optimistic about the market in downtown San Jose,” Liu said. “The city needs condos to meet the needs of the young urban workers, and the city is trying to make downtown a very active and sustainable area.”
Silvery Towers figures to be a condo development with a sleek modern design and plenty of amenities such as a swimming pool and fitness center, he said. The project would feature two towers—one 20 stories and the other 22—and include more than 20,000 square feet of retail space as well as underground parking.
The project is estimated to be an investment of $300 million and expected to finish in about two years, he said. There was consideration earlier in the project lifecycle to develop one tower at a time, however Liu confirmed that both will be built simultaneously.
“Silvery Towers will be located in the premier San Pedro Square area, rich with restaurants, employment and nightlife,” Mark said. “Silvery Towers will have a huge impact on the growth and vibrancy of the neighborhood. Its sheer size will help to establish the area as an upscale urban destination unlike anything before it.”
Silvery Towers is part of the current cycle of downtown residential construction that will bring 1,750 units to the area, Walesh said.
Other high-rise apartment projects under way include the 23-story, 312-unit One South Market being developed by Palo Alto-based Essex Property Trust, Inc., and the 21-story, 347-unit The Centerra, which San Francisco-based Simeon Residential Properties is developing behind San Pedro Square Market, on a block bounded by Almaden and Notre Dame avenues and St. John and Carlyle streets. The Centerra, financed by union pension fund AFL-CIO Building Investment Trust, also will include 7,000 square feet of retail space.
The previous construction cycle brought 2,300 units to downtown, Walesh said, and another dozen projects in the planning pipeline would lead to 2,000 more.
All these projects add up to 6,050 units—more than halfway toward the city’s desire of seeing 10,000 units completed within a few more years, she said.
That 10,000-unit mark represents a critical mass that would encourage new Class A office construction—space that San Jose sorely lacks—and other quality development downtown, she added.
Spurring all the housing activity have been the city’s programs that have reduced parkland in-lieu fees by 50 percent, expedited the planning process and provided other incentives for high-rise residential development downtown.
These incentives “have been successful at infusing millions of dollars in private investment into downtown,” city officials said in a staff report to the council in September.
In the case of Silvery Towers, it so happens that much of that capital is coming from China, reflecting a surging interest overall in United States real estate by investors in that Asian country.
“Chinese investors and buyers are drawn to San Jose and San Francisco because of the area’s growth and potential” for a strong return of investment, Mark said. “They have access to capital readily available and are eager to jump into the market. They are familiar with high-rise condo development.”
In 2014, investors from mainland China poured $3.8 billion into American properties—a year-over-year increase of 6 percent, according to the latest research from the commercial real estate services firm CBRE Group, Inc.