Silicon Valley’s affluent and tech-oriented consumers are driving millions of dollars of investment in redevelopment and new construction of retail and mixed-use projects from the West Valley to south and central San Jose.
Developers from Australia-based Westfield Group and Maryland’s Federal Realty Investment Trust Inc. to the South Bay’s own Hunter Properties are rejiggering and repositioning existing centers and breaking ground on new centers in anticipation of the region’s continued prosperity and high incomes. The results are often dramatic.
The Westfield Group has increased sales with an enhanced tenant mix at the Westfield Oakridge mall in South San Jose. Tenants include Macy’s, Target, Apple and a 20-screen Century movie theater. The Westfield Group bought the property in 1998 for just shy of $80 million, according to public record. Several years ago, the mall underwent extensive renovations worth in excess of $140 million, and the company expanded it by 300,000 square feet, pushing the total to more than a million.
“There’s some insanely fantastic household incomes to be had,” Shahram Moussavi, senior leasing manager for Westfield, told a crowd of about 80 mostly business professionals in Silicon Valley on Aug. 8. The average household income in the Westfield area is about $126,500 a year with nearly 50 percent of the 170,300 families there earning more than $100,000. The average home value is close to $630,000. Forty-one percent of the population graduated from college, and the median age is 38.
Moussavi and others in the shopping-center industry shared insights into successful retail ventures as part of a program offered by the New York-based trade association International Council of Shopping Centers. “Our goal is to educate the next-geners on the market and obviously also the veterans,” said Amber Wright, event host and senior leasing manager for the Westgate Center mall at 1600 Saratoga Ave. in west San Jose. Most developers are choosing to redevelop in Silicon Valley rather than pursue new development opportunities, Wright said, citing a shortage of land.
Fred Kim, development director at Federal Realty, which owns Westgate, appeared on the panel as did Jain Wager, managing director for San Francisco-based Merlone Geier Partners, and Curtis Leigh, development director at Hunter Properties. The event was held at Santana Row, a central San Jose urban-infill redevelopment with more than 40 acres of shops, restaurants, apartments and offices that is also owned by Federal Realty.
Federal is seeking entitlements from the city of San Jose to further redevelop the tract and at least one neighboring parcel to Santana Row, which replaced a low-lying Town & Country center with mid-rise buildings housing a hotel, offices, apartments and sundry amenities including a fitness center.
Westgate, too, is a renovation of an old retail center that was disjointed both from a visual and merchandise standpoint. Now the 640,000-square-foot center has a modern, more-cohesive look and appeals to the younger segments of the population with stores such as Old Navy and the Nike Factory. The mall also has a children’s play area. “We want to make it viable for the next 20 years,” Kim said.
Further north in Mountain View on the El Camino Real at San Antonio Road, a high-traffic intersection at the town’s border with Palo Alto, the Village at San Antonio Center is replacing a dilapidated hodgepodge of low-intensity first-generation development surrounded by swaths of surface parking. The new center, pulled close to the street, features a high-end apartment community, a new Safeway, restaurants, boutique shops and office spaces interwoven with sidewalks, open plazas and a park.
A project by Merlone Geier, the village was initially conceived as “a suburban retail experience” but evolved into “a high-density, mixed-use urban development,” Wager said. Research revealed strong demand for housing in the area and that dining and drinking are a large part of the entertainment of residents.
Hunter is developing new retail centers in South San Jose: the Village Oaks and Almaden Ranch. In both case, the centers’ infill locations mean they serve thousands of existing households. Hunter Properties expects to complete Village Oaks next year as part of the redevelopment of a former IBM Corp. campus on Cottle Road, with more than 300,000 square feet of retail, anchored by Target and Safeway. Housing developers are expected to build thousands of high-density homes on the surrounding property.
Similar to the Westfield area, the community surrounding Village Oaks is relatively well heeled with an average household income of about $100,000, but Leigh noted that residents are significantly underserved by dining, shopping and entertainment venues.
The 350,000-square-foot Almaden Ranch is slated for a 2015 completion, featuring a 145,000-square-foot Bass Pro Shops.
He sees a lot of retail centers trying to appeal to the younger generations and the tech-savvy based on the prevalence of youth-oriented shops like Old Navy and technology outlets like Apple Inc. stores, said San Francisco architect Glenn Wood, who attended the forum. “When I’m designing retail projects, I’m looking to bring together place-making aspects and landscaping with the right mix of retail,” he said. “Santana Row is a great example.”