Five projects have lately broken ground and — to use the parlance of developers — are now “going vertical,” bringing about 1,300 apartments and condos to the neighborhood. Beyond that, as many as 20 projects with about 6,000 units are in the pipeline, recently approved or under review by City Hall.
Just how many of the planned projects will move forward remains to be seen, as developers are constantly reassessing the marketplace. Still, all this activity potentially dwarfs the previous wave of downtown high-rise development, which came right before the crash of 2008 and brought just over 900 units to the neighborhood. Prior to that, new downtown housing projects had been low-rise, mid-rise — and sporadic, though there have been waves of office tower development going back decades.
As the cityscape changes yet again, the Centerra patio perch looks down on a wide swath of the new San Jose.
Straight ahead is San Pedro Square Market and its trendy eateries, ground zero for downtown’s growing population of millennials. Over to the left, the twin Silvery Towers — recently taken over by a Chinese development firm known as Full Power Properties — is on the rise and will house 643 condominiums. Going up to the right of the market is the Modera, with 204 apartments, and farther to the right of that is the dreary old Greyhound bus terminal, awaiting demolition and replacement by a 781-unit luxury high-rise.
Four luxury complexes with more than 1,100 units opened in the last year, and occupancy rates are high — approaching 95 percent at Centerra, where most tenants are in their mid-20s to early 40s and work in tech. They pay between $2,500 and $3,780 monthly for apartments that come with hotel-style amenities including a full gym, heated swimming pool, and “barbecue zone.”
“We wanted a feel where it was young, hip kind of people in a fun, young area where we could walk to things,” says Tamara Sam, 38, a marketing strategist and Centerra resident since March, when she and her fiancé left Toronto for new careers in Silicon Valley. After looking at 25 apartments up and down the Peninsula and South Bay, the couple settled on downtown San Jose: “We’re walking to restaurants, we’re walking to bars, and a big deal for me is being close to transit,” says Sam, who walks to Caltrain at nearby Diridon Station.
Blage Zelalich, downtown manager in the San Jose Office of Economic Development, notes that downtown has been through previous boom-and-bust cycles. It remains “episodic in terms of having the vibrancy and the energy — the hustle and bustle of what you think the center of a city with a million people is like. We still have a relatively small office workforce,” she says, “just 35,000 to 45,000 workers.”
By contrast, downtown Oakland has about 85,000 jobs, while downtown San Francisco has around 350,000, according to SPUR.
A missing element in the discussion is affordable housing. Not much has been built or planned, even though downtown is home to a sizable population of university students. Lenders and developers say that’s because high-end housing generates the investment returns required to take on the years-long process of planning and building projects that typically cost more than $100 million.
A “fairly long runway” is required for such projects, says Ken Tersini, principal of KT Urban, a major downtown developer. And with construction costs rising, he adds, “returns are still really nebulous, and it’s keeping a lot of activity on the sideline right now.”
There’s “nobody in the real estate business that thinks this cycle will last forever,” cautions Drew Hudacek, chief investment officer for the Sares Regis Group, which built The Pierce, a luxury mid-rise complex with 230 units that opened in the SoFA district this year. He suggests that downtown is best thought of as “a living organism” that has its ups and downs “and is doing great right now.”
Remember, he says, “Every new building is a step toward more vibrancy.”