San Jose’s City Council has approved a trio of agreements with Samsung Semiconductor Inc. to build a 680,000-square-foot research and development campus and new North American headquarters in North San Jose.
The project is expected to involve a capital investment of no less than $200 million, assuming an estimated per square foot construction cost of about $300 and excluding the value of business equipment required to outfit the facility.[contextly_sidebar id=”41aaf4ce5688c68dbfbb125f1ef90462″]The campus, which is proposed to include two, 10-story towers, is expected to house 2,000 workers. Samsung has an existing 300,000-square-foot complex at the site, 3655 N. First St., where 370 people already work.
The development is a notable inflexion point for a 5,000-acre, historically industrial area of San Jose that the city has sought for nearly a decade to make more urban and mixed-use. North San Jose commercial property markets are always slower to recover than those in Palo Alto, Mountain View and Sunnyvale to the north, and recovery had been even more tentative in this cycle.
Now comes a major global semiconductor company with a huge vote of long-term confidence in the economic and business viability of the neighborhood. Moreover, its campus, designed by architects NBBJ, proposes to be another new, iconic corporate locus for Silicon Valley, endorsing anew the value of the suburbs. NBBJ, which has offices in San Francisco, is also the architect behind Google Inc.’s new Moffett Park campus.
“This is a big deal,” San Jose Mayor Chuck Reed told the City Council on March 26. “We don’t get this opportunity very often.”
Samsung Semiconductor, a wholly owned subsidiary of South Korea’s Samsung Electronics Co. Ltd., has had its headquarters in San Jose since 1986, starting in a single building, Reed said. The company contemplated moving the operation to Austin, Texas, and solicited the involvement of California Gov. Jerry Brown’s office in structuring an incentives package.
Under questioning from San Jose City Council member Sam Liccardo about incentives offered by the rival Texas town, a Samsung representative declined comment.
The city of San Jose agreements collectively promise Samsung up to $7 million in city tax incentives over 10 years. The city claims that in the same 10-year interval the company’s investment will generate approximately $23 million in new revenue “for the benefit of the city,” including $2 million in annual property taxes and $520,000 in annual utility taxes.
The city-Samsung agreement is dependent on the state of California signing its own incentives package with Samsung by May 1. That includes a research-and-development tax credit and a 12 percent discount in the company’s electric utility rates. The value of those incentives to Samsung was not disclosed.
Dennis Chambers, a long-time commercial property broker in Silicon Valley and a partner at Cassidy Turley Commercial Real Estate Services, said Samsung’s decision telegraphs a strong message of renewal for North San Jose. “I think it is just fabulous. Everything in the area is 20 years old and 30 years old and often dated,” he said. “Anything we can do to turn these buildings and area around, we need more of that.”
Other developers including San Francisco’s TMG Partners, Boston-based investor Alcion Ventures LP, Divco West Properties, Bixby Land Co. and LBA Realty all have acquired existing buildings in the same North First Street area and are investing to reposition and upgrade them as well.
San Jose expects to forgo more than half of a transportation tax originally imposed to deal with the increased traffic congestion associated with a 2005 land–use plan allowing 32,000 new high-density housing units and millions more square feet of offices. The cut means the city will take in less than $2.5 million in traffic impact fees from Samsung while relinquishing $3.9 million.
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