Onthe
downtown
decline
How low can
office vacancy go?
The downtown office population is growing after a
number of attention-grabbing lease announcements
over the summer.
Office vacancy has dropped to 18.8 percent, still
a point off 2007 levels but down from almost
29 percent during the peak of the Great Recession.
Headline-making deals include Xactly and Intacct’s
expansions into the long-vacant Riverpark Towers II on Park Avenue;ThreatMetrix’s expansion
to additional floors at 160 W. Santa Clara St.; and
office-space provider Regus snapping up room on
Almaden Boulevard. Electric Cloud’s move from
Sunnyvale to a historic building on Market Street
also gained notice.
“There is a lot of interest,” said broker Geri Wong.
“We are in the spotlight.”
The vacancy rate is still a far cry from the 2 percent
the city’s core experienced at the height of the
dot.com boom.
The end of that era had a profound, long-term
effect. Two commercial towers built during that
time stood empty for years, driving up the vacancy
rate downtown.
By 2007, those holes were beginning to fill. That
was when BEA Systems bought the long-empty
Sobrato building, today owned by Oracle, at
488 Almaden Blvd. The vacancy rate dipped
to below 16 percent.
Then the Great Recession happened, halting that
momentum.
Recent moves might spell the end to the arrested
development.
City of San Jose Chief Economist John Lang, for
example, points to Riverpark Towers II. As cloud
companies Xactly and Intacct make improvements,
it could become increasingly attractive to other
companies. Filling that single building, he said,
could drop downtown’s vacancy rate by another
5 percent.
“That one building alone has been keeping vacancy
artificially high,” Lang added.
A number of factors converging in the regional
office and employment markets reinforce the
positive trend for downtown San Jose.
“People are getting priced out of the peninsula and
they are realizing what value there is downtown,”
Wong said.
Easy access to transit, a walkable urban center with
restaurants and other amenities draw and keep businesses here, she added.
Boston Properties is entitled for three buildings along Almaden Boulevard if it finds interested tenants.
Downtown office vacancy, 2007-current
Filling up office space also means good things for
downtown’s retail shops and restaurants.
30%
25%
20%
15%
’07
’08
’09
’10
’11
’12
’13
’14
For ThreatMetrix, a cloud-based fraud prevention and cyber security company, downtown is a
convenient midpoint for the company’s Bay Area
employees and a great environment for its team, said
CFO Frank Teruel.
“We are walking distance to Sharks games and
concerts, and a quick ride up to Levi’s Stadium
for 49ers games,”Teruel said. “The city has also
been extremely helpful and collaborative in our
expansion efforts.”
The growing high-tech firm recently took on a
second floor in its building with plans to add a third
to its corporate headquarters in 2015.
Unlike ThreatMetrix, Electric Cloud wasn’t in San
Jose before its latest move. The cloud provider of
automation systems for software development and
deployment grew out of its Sunnyvale offices.
The office wasn’t near restaurants or transit and
moving to Palo Alto or Mountain View was
expensive, said CEO Steve Brodie. Rates downtown, he said, were extremely competitive with
high-end buildings for taking. It’s a change his
employees love.
“I think people may have outdated perceptions of
San Jose, but when people saw San Pedro Square
Market and all of the restaurants in the neighborhood, they were really excited,” Brodie said.
The new office is convenient to transit and is a train
ride away from the company’s San Francisco office.
“The more people you have in buildings, the
more foot traffic you have and the stronger retail
opportunities there are,” said SPUR San Jose Director Leah Toeniskoetter. It also creates something
of a virtuous cycle,Toeniskoetter added. For every
place that becomes more vibrant, brokers have
increasing talking points to recruit more office
dwellers downtown.
“Those places that attract energy and hold it all
day, like the San Pedro Square Market, become an
example of what is happening downtown,” she said.
It is a cycle with built-in brakes, though. As
demand for downtown office space increases, so
do prices. Wong already sees the trend.
“I am seeing a lot of price appreciation in what
people are asking for,”Wong said.
That’s part of what tempers Lang’s forecast on
growth for downtown, but only slightly. “We are
forecasting a continued decline in vacancy rates
through 2015,” he said, “but it may slow as rates
rise.”
Overall, downtown’s offerings will continue to draw
businesses to come and grow here, he said.
In fact, Boston Properties is looking for a major
tenant for its approved plans to build 840,000square-feet of office space in three separate buildings on Almaden Boulevard.
The U.S. patent office set to open in 2015 and
the currently-under-construction expanded court
facilities downtown could increase the area’s
non-tech base.
“The reality is that there is a very strong legal and
financial base downtown,” Lang said.
And, with the new residences under construction
downtown, office workers will have added reasons
to move within walking distance of their jobs.
Groundwerx reduces water use in drought
In keeping with a City of San Jose directive to reduce water use this droughtstricken year, Groundwerx has made adjustments in its pressure-washing and
landscaping schedules, effective Aug. 1.
Pressure-washing: Groundwerx will reduce its daily cleanings from
3.5 times to 3 times, and will use 155 gallons out of each tank rather than
180 gallons, leading to a 26 percent reduction in water, said Rich Mongarro,
Groundwerx program director. Groundwerx and the city are also looking into
the use of reclaimed water to wash sidewalks.
Landscaping: Groundwerx has a plan that reduces water to landscaping,
planters and baskets by 20 percent. Instead of delivering two gallons to each of
the 77 baskets downtown, plant caretakers will deliver one gallon three days a
week, said Ron Turner of Allbay Landscaping, adding that waterers will also
capture overflow and pour it into planters along walls and planters. Groundwerx had already reduced its baskets 30 percent since May. Similarly, the strategy
on sidewalk and wall planters is to reduce the watering cycle by 20 percent.
“It’s a balancing act between using less water and decreasing efficiency,” said
Eric Hon, PBID operations manager. “We are finding the right balance that
ensures downtown’s cleanliness.”
A June 23 memorandum by City Manager Ed Shikada updated the city’s
water-saving efforts. Guadalupe River Park and Gardens and Plaza de Cesar
Chavez are exempted from conservation efforts this summer. Also, fountains
that use recycled and treated water, such as in Plaza Park, remain operational.
VO L . 2 6 N O. 4
SEPTEMBER 2014
SAN JOSE
D O W N TO W N
A S S O C I AT I O N
SJDOWNTOWN.COM
Public Meetings
Candidates tackle issues:
SJDA will host a City Council
“doubleheader” candidates
forum on Sept. 12 at the
Tech Museum of Innovation,
starting a 8 a.m. District 1
candidates Paul Fong and
Charles Jones will square
off, followed by District 7’s
Maya Esparza and Tam
Nguyen. The election is
Nov. 4. The winners will
begin their terms in January
2015.
Also, save Oct. 10, 8 a.m.,
for SJDA’s Annual Meeting,
to be held at San Jose First
United Methodist Church,
24 N. Fifth St.
Please RSVP for both events
with Ellen Lee, elee@
sjdowntown.com.
by then, according to the option agreement.
San Pedro Square Market opened in 2011 and includes
17 food places, four drinking establishments, three retail
stores and barber shop. Its 25,000 square feet includes
the Peralta Adobe, adjacent plaza, two renovated buildings and a new building fronting St. John Street. The
City Council in 2008 agreed to help fund the project
with $6 million in redevelopment agency loans and
grants.
Student housing project: Symphony Development
is moving quickly on its student housing project across
from Horace Mann Elementary School at 27 N. Sixth St.
and tucked between Le Petit Trianon and First United
Methodist Church on Fifth Street.
Live, Thrive, Enjoy, Belong . . .
Forty-six sets of colorful banners celebrating downtown’s diversity started adorning street poles along
First and Second streets between St. John and San
Carlos streets in August. A joint project between the
Property-Based Improvement District and the city’s
Office of Economic Development, the banners focus
on positive keywords and images reflecting an active
urban lifestyle.
SJDA News
Candidates forum: District 3 City Council candidates
Don Gagliardi and Raul Peralez each answered
17 questions put forth by
the San Jose Downtown
Association at its candidate
forum on Aug. 8 at Le Petit
Trianon Theatre.
The two candidates in
this November’s runoff
election for the downtown
council seat being vacated by
Raul Peralez
termed-out Sam Liccardo
answered questions about
pension reform, St. James
Park, city-county relations,
housing fees, the homeless
issue, sales tax proposals,
the arts, public safety, SJDA’s
role in the city, transportation issues, Major League
Don Gagliardi
Baseball, small business
development, their favorite
downtown restaurants and who each favors to become
the next mayor. For their views and endorsements, check
raulperalez.com and donforcitycouncil.com.
The Downtown Association will hold a “doubleheader”
City Council candidate forum at its Sept. 12 meeting at
the Tech Museum, starting at 8 a.m., featuring District
1 candidates Paul Fong and Charles Jones, and
District 7’s Maya Esparza and Tam Nguyen.
Downtown News
Towers sold to Chinese developers: After gaining
planning approval to build the 643-unit Silvery Towers
at 190 W. St. James St., KT Properties has sold the
property to Full Power Properties, LLC, an affiliate of
R&F Properties of Guangzhou, China.
Full Power plans to move full-speed ahead on the
project, hoping to get the building permits and break
ground in spring 2015, completing the towers within
26 months of the starting date. The project includes a
20-story, 308-unit western tower and 22-story, 335-unit
eastern tower, plus about 20,000 square feet of retail
space adjacent to the historic Fallon House and San
Pedro Square Market expansion.
Originally thought to be apartments, the new structures
may be built as condominiums averaging 900 square
feet. KT Properties principals Ken and Mark Tersini
intend to stay active with the project, which is named
after their grandfather.
This project marks the first significant Chinese investment in downtown San Jose residential development.
Room to grow market: Urban Markets, LLC, has
exercised an option to acquire the 13,045-square-foot
parcel at 150 Terraine St., next to the Fallon House,
from the city for $521,800. The acquisition gives the
owners, including former Mayor Tom McEnery, John
McEnery and Martin Menne, room to expand the
San Pedro Square Market. The option agreement allows
the owners to build a two-story building on the property,
or pay the city any increased value in the land if they
choose to build higher. The city can purchase the property back in five years if building has not commenced
In August, Los Angeles-based Symphony Development closed its acquisition of the 1.15-acre site and
immediately started demolishing the former parking
structure on the site.
Now, Johnstone Moyer, Inc., of San Carlos has begun
construction of
the
sevenstory,
119unit
Symphony Development is building
offstudent housing.
campus
apartment community of two-, three- and four-bedrooms tailored for university students. The units will be
contained in the five stories above a two-story parking
podium. The development will include pool, fitness
center, computer lab, recreation facilities, study areas,
garden and furnished apartments wired for today’s
college student, said Symphony president and
co-founder David Hilliard.
September events
SoFA Street Fair makes comeback: After a
13-year absence, the “reupholstered” SoFA Street Fair
returns Sept. 14 as a free, all ages celebration of the
music, art and culture of the eclectic South First Arts
District.
SoFA Street Fair will feature more than 50 artists
performing on three outdoor stages, and in multiple
indoor venues, from noon-8 p.m. Fishbone will be
the featured artist, joined on the bill by a special
reunion show from Salmon and the post-hiatus
showing of Insolence, said musical directors
Gary Avila and Jimmy Arceneaux.
“The first SoFA Street Fair was held in 1992 to
celebrate the emergence of a new neighborhood of
galleries, coffee shops, nightclubs and small retail
– that stood as stark contrast to the expensively
‘redeveloped’ downtown just blocks away,” said
Fil Maresca, who co-produced the SoFA Street Fair
with the Downtown Association from 1992-2001.
This year’s return celebrates the SoFA District’s
continued spirit and popularity. Hundreds of new
residents call SoFA home – enjoying the abundance
of sidewalk cafés, art galleries, restaurants, nightlife,
theater, yoga, and rock-climbing walls. These businesses and organizations will be open and showcasing
talent during the festival.
Farmers’ Market in autumn: The Downtown
San Jose Farmers’ Market, presented by Kaiser
Permanente, continues to attract about 2,000 shoppers
per week. The market transitions into its late summer
season in September, featuring corn, zucchini, Asian
vegetables, figs and tomatoes.
The market opens each Friday, 10 a.m.-2 p.m., along
San Pedro Street between Santa Clara and St. John
streets.
Customers are encouraged to bring their own reusable
and washed bags. Check sjdowntown.com.
More event info:
Sept. 5 – South First Fridays and STREET MRKT,
multiple venues; plus Oct. 3. southfirstfridays.com
Check listings at:
u sjdowntown.com/events/downtown-events
u sjdowntown.com/summer
u sjdowntown /summerinstjames
u liveandlocalsj.com
At the Convention Center
Sept. 8-11 - Atlassian Summit (3,000)
summit.atlassian.com
Oct. 1-2 - Techmanity (5,000) techmanity.com
Oct. 3-4 - Rock ‘n’ Roll Half Marathon Expo (13,000)
runrocknroll.competitor.com/san-jose
(estimated attendance)
2 8 N . F I R S T S T.
Prsrt Standard
U.S. Postage
Paid
San Jose, CA
Permit No. 5116
SUITE 1000
SAN JOSE, CA 95113
408.279.1775
return service requested
Hilliard hopes to have students move in for the fall
2016 term, which will likely be simultaneous with
San Jose State’s 850-bed Campus Village Phase 2.
VTBS Architects designed the project for Symphony.
Oh, the Techmanity: Live Nation and Fast Company
bring together technology and music for Techmanity,
Oct. 1-2 at the San Jose Convention Center and downtown venues. The conference focuses on “products
that improve human creativity, productivity and quality
of life.” Techmanity includes information from the
software, mobile, semiconductors, networking,
gaming, health, wearables, cloud and internet
industries. Thievery Corporation and Weezer headline
concerts at City National Civic and SJSU Event Center,
respectively, on Oct. 1-2.
Check techmanity.com.
Business News
LitBit opts for downtown HQ: LitBit has plans
to provide data center software internationally, but its
home will be downtown San Jose. The startup will
take the remaining 8,000 square feet of the historic
Metropole building, 35 S. Market St., to develop its
products. Electric Cloud recently moved into the
building also, leasing 18,600 square feet.
Scott Noteboom, who ran data centers for Apple,
Yahoo and Abovenet, founded LitBit a year ago in
Palo Alto. By doubling the size of its team, Noteboom
searched the entire peninsula, eventually landing in
“his favorite building in San Jose.”
Litbit will focus its service on emerging global markets. Check litbit.com.
Two-wheel fun: Silicon Valley Bicycle Coalition
has moved downtown into an office at 96 N. Third
St., reported Anne Fisher, administrative manager.
SVBC’s goal for the next decade is to increase total
trips by bicycle in Santa Clara and San Mateo counties
to 10 percent. The non-profit organization promotes
healthy community, environment and economy
through bicycling, advocating for safer routes, open
streets, bike-friendly work places and bike education.
SVBC, which started downtown, was previously at
1922 The Alameda.
Visit bikesiliconvalley.org.
Community work feted: Gordon Biersch received
a “Heart of San Jose” award in August from the city’s
Environmental Services Department. Gordon Biersch
operates a 114,000-square-foot brewing and bottling
facility as well as a restaurant in downtown San Jose.
Gordon Biersch’s Barry Hartley, general manager in
San Jose, received the award. Visit gordonbiersch.com.
Downtown Facts
How VTA compares to other transit systems:
Transit Operator
Service Area Population in Weekday Trips
Farebox Cost / Passenger Mile
(Sq. miles) Service Area Ave. Total / per 100k Recovery Bus
Light Rail
Dallas (DART)
695
2.4 million
237,516
9,801
10%
$1.50
$0.63
Denver (RTD)
2,326
2.7 million
325,050
12,411
21%
$0.75
$0.39
7,788
Houston (Metro)
1,285
3.5 million
274,736
18%
$1.01
$0.66
Los Angeles (Metro)
1,513
8.6 million
1,465,927 16,993
25%
$0.61
$0.55
Portland (TriMet)
570
1.5 million
328,358
22,040
26%
$0.99
$0.45
San Diego (MTS)
716
2 million
271,069
13,829
41%
$0.75
$0.32
San Francisco (Muni)
49
800,000
696,203
86,460
29%
$1.13
$1.33
1.9 million
141,162
7,505
11%
$1.28
$1.10
Santa Clara Valley (VTA) 346
Source: SPUR Freedom to Move Report, July 2014, spur.org
From the Archives
25 years ago – Sept. 8-9, 1989 – The Events Center
and Aquatics Center at San Jose State opened.
20 years ago – September 1994 – The Preservation
Action Council began a campaign to save the River
Street Historic District from demolition. River Street is
now home of the fledgling Little Italy area.
10 years ago – Sept. 18, 2004 – Opera San Jose
presented Mozart’s “The Marriage of Figaro” to reopen
the renovated California Theatre, originally built in
1927 and closed from 1973-2004.
Downtown Dimension
is published monthly by
the San Jose Downtown
Association, a nonprofit
organization established
in 1986 to serve the
Downtown business
community. Printed on
recycled paper using
soy-based inks.
Editor-in-Chief: Scott Knies
sjdowntown.com
Editor: Rick Jensen