By Meghan Hall
It is no secret that the San Francisco Bay Area is experiencing a deep housing crunch, one that has prompted property values and the cost of construction to skyrocket. The real estate game, one of risk and reward, often means that local property owners and developers are increasing the density of their projects to raise the economic feasibility of their developments and the likelihood they will turn a profit. Local property owner Nelly Ames has done the same and hopes, she said, to do her part in responding to the region’s housing crisis. Ames originally proposed constructing an 11-story multifamily complex with 101 units to replace the current Metro Station Apartments located at 439 and 451 S. 4th St. in San Jose. Now, Ames and Santa Clara-based Salvatore Caruso Design Corporation are proposing to construct an 18-story, 218-unit residential project.
“I feel bad having to turn people away all of the time because there is no place for them to stay,” explained Ames, who also works with veterans and homeless so they can afford some of the property’s current units. “I keep seeing the crisis in the city. Google’s coming to town, Apple’s in town. Students need homes. I just looked at all of the demographics and thought we’re going to have a lot of people without homes if we don’t fix this, so I doubled it.”
The proposed project will also include 1,345 square feet of commercial space and a 12,381 square foot public eating establishment. The development’s parking garage — which will include 110 vehicle spaces — will be subgrade and at ground level. 56 bicycle slots in stack racks and 27 motorcycle spaces will also be provided. An 887 square foot community center, a 614 square foot fitness center, pool and 2,544 square feet of common open space are also detailed in the project plans. Ames also plans to build a 6,418 square foot rooftop deck complete with a kitchen, sitting areas, heaters, planters and permanent art installations.
For Ames, the rooftop is her favorite part of the property and was inspired by the InterContinental Hotel in Los Angeles. “It will be the most beautiful lounge,” she said. It’s a great asset.”
The development’s units will be composed of studios, one-, two- and three-bedroom apartments ranging in size from around 350 square feet to just over 1,300 square feet. Some of the units will be market rate and affordable, while others will be reserved for veterans, Ames said. The breakdown has yet to be decided.
Currently, the property is developed with the Metro Station Apartments, constructed in 1965, and a single-family home built in 1870. If the project is approved, both buildings would be demolished to make way for the new development. Ames hopes that the project, which is expected to cost between $70 and $78 million, will break ground next year, with completion in 2021 or 2022.
The project site is located on the west side of S. 4th St. in downtown between E. San Salvador St. to the north and E. William St. to the south and was first platted within San Jose’s original city as established in 1851. According to project documents, the block and the project site have contained a variety of buildings and uses.
The site is easily accessible from both State Route 87 and Interstate 280, blocks from San Jose State University and the convention center. Several bus and light rail stations are located within a few minutes’ walk of the site. Diridon Station, one of the region’s major transportation hubs, is also about ten minutes away by car.
The apartments, if approved, would add to record-high levels of commercial and multifamily development planned for San Jose in the coming years. In February, Boston Properties proposed 1.8 million square feet of office space blocks from Ames’ proposed project, while on the other side of downtown, closer to St. James’ Park, Trumark Homes recently opened its SP78 condominium complex. Brent Lee, a Saratoga, Calif.-based real estate investor and San Jose-based Republic Urban have also proposed to build nearby, with plans to construct a 316-unit apartment complex called Spartan Heights, which would be geared toward university students.
Despite the number of projects in the pipeline, housing — and construction — remains expensive in San Jose and the greater Silicon Valley, a trend that is unlikely to ease up anytime soon. According to Marcus & Millichap’s 2018 Fourth Quarter Multifamily report, the vacancy rate for multifamily product hovers at around 3.4 percent, even lower than San Francisco, and a negative 110-basis point change year-over-year. The average effective rent at the end of $2,868 per month, an 8.7 percent increase that will continue as unemployment rates remain low and household formation surges.