Years in the Making, Local Property Owner Looks to Expand San Jose’s Tropicana Shopping Center

By Meghan Hall

The world of retail — both across the United States and San Francisco Bay Area — has changed dramatically since developer Dennis Fong began buying property in San Jose several decades ago. Shifts in market fundamentals and the nature of retail have prompted property owners to include offices, restaurants and entertainment in their centers as a way to produce more foot traffic in an era where e-commerce continues to take up a growing share of the market. Fong, a partial owner of the La Placita Tropicana Shopping Center in San Jose, is one of many developers using this strategy and plans to expand the current shopping center by constructing a three-story commercial office building totaling 31,744 square feet.

According to City documents, 20,7478 square feet would be attributed to office uses, while 10,996 square feet would be used as retail space. In all, the property totals 10.92 acres and has approximately 147,657 square feet of retail and 7,850 square feet of office space. Currently, buildings border the southern, eastern and western perimeters of the shopping center, with a large parking lot spanning from the middle of the property to the northern boundary along King Rd.

The property is comprised of 10 different parcels, although the proposed development would be located on a 0.86-acre section at the south end of the property. The project would remove four rows of parking, eliminating approximately 100 vehicle spaces; currently, there are 644 parking spaces on site. The project would also reconfigure access to the center, which currently has one driveway on Story Rd. and two driveways on South King Rd.

The project site, located at 1644 Story Rd., is surrounded by a diverse mix of properties ranging from commercial to residential to open space and public land uses. The shopping center itself is home to an array of retailers, including Tropicana Foods, for which the center is named. The shopping center first opened its doors in 1960 and has been a popular destination for Hispanic and Asian shoppers who live in the area. Many of the shops are local mom and pop businesses, as opposed to big-name national retailers such as Starbucks and Target that are also located nearby.

Fong’s efforts to update the center have been years in the making; according to previous industry reporting, Fong began buying parcels at the Tropicana Center in 1983 with the intent of developing a plan to overhaul the entire center. In 2001, Fong’s efforts were further complicated when the now-defunct San Jose Redevelopment Agency attempted to seize the property and give it to a private developer. At the time, the Agency claimed Fong was not moving quickly enough to revitalize the property. Fong refused to sell and challenged the attempt in court. In 2005, Fong reached a $6.5 million-dollar settlement with the City in Santa Clara County Superior Court, and in addition to the settlement, the City also agreed to pay about $1 million in legal fees from the suit.

Although many retail property owners are working to diversify retail centers with mixed-use projects to ensure the business longevity of their centers, both the retail and office markets in San Jose are strong, according to fourth quarter reports released by brokerage firm CBRE. The average retail vacancy rate for shopping centers in Silicon Valley was about 4.3. percent at the end of the year, with the average asking lease rate around $33.50 per square foot. There is also close to 1.1 million square feet of retail space under construction in Santa Clara County. When it comes to office space, a surge of large block leasing activity across Silicon Valley drove office vacancy rates down to eight percent at the end of 2018. According to CBRE, should tenant supply continue at its current levels, market conditions are expected to tighten, as there is currently only 1.3 million square feet of speculative office development currently in the pipeline.

As of this writing, Fong did not phone messages seeking comment on the project.

West Coast Commercial Real Estate News