Today, our focus is on the City of San José, which after experiencing a boom in requirements for new office in the downtown core has seen a steady softening in rents following the pandemic. Office utilization remains near historic lows similar to many of the gateway markets nationwide, and with the rise in interest rates, sales have also slowed. Despite this softening, major employers continue to invest in the area. For example, Adobe is opening a new tower with occupancy of up to 2,500 workers, doubling down on its commitment to Downtown San José. The city has faced headwinds before, and the impact on asking rents as a barometer for long-term health (as illustrated below) shows that San José is a more enduring office market than ever due to the presence of technology and the desirability of the area to live.

The quality of life in downtown, and restaurant and entertainment destinations that have become the norm over the past 10 years, have helped keep demand alive. Retailers and operators continue to focus on the area with the infamous indoor miniature golf venue Urban Putt and Unofficial Logging Ax-Throwing in Urban Catalyst’s Paseo development. Downtown San José Downtown is u only 10 by 10 blocks so when a restaurant like Scratch Cookery Chicken, transitioning from a food truck, opens a brick and mortar location, it really makes an impact.

This vibrancy in downtown has kept multifamily vacancy below the metro’s historical average and effective rents are above pre-COVID levels. This dichotomy in asset performance illustrates the importance of creating a downtown environment where residents can both live and work. San José continues to build upon its transit-oriented location and create an environment that reflects the interests and values of its diverse population.

The City of San José and our industry peers have undertaken several projects to make San José a more amenity-rich location that attracts businesses and families alike. The San José City Council unanimously voted to permanently transform San Pedro Street into a pedestrian walkway, committing almost $10 million to the project. “Local restaurants’ and City leaders’ bold initiative to close the street during the pandemic and create a vibrant outdoor dining and socializing environment provided the opportunity to build upon the continued activation and desirability of Downtown San José”, notes Marco Esposito, the landscape architect with SWA who assisted the City with envisioning the transformation. The City is also working on the redevelopment of Columbus Park just north of downtown. The park will be renamed Janet Gray Hayes Park, in honor of San José’s first female mayor, and will include new sports courts, fields, and gathering space.

Opportunities in downtown have kept groups like Jay Paul, Vancouver’s Westbank, and local group Urban Catalyst focused on the area. Urban Catalyst has nine diverse projects in development including the recent pouring of the 3rd floor at a 175 key dual branded Marriott TownePlaceSuites hotel and the recently completing the Paseo mixed use building that leased over 25,000 sf of retail during the pandemic. “The total pipeline in Downtown San José for projects under construction, entitled, or going through the entitlement process represents 100,000 net new residents or workers living and playing within a 10 by 10 block area over the next decade – it’s profound.” said Urban Catalyst Partner Josh Burroughs.

ULI continues to partner with the City of San José on a number of initiatives that not only promotes its continued growth in an equitable and sustainable way, but ensures its downtown rebound promotes diversity. From an Advisory Services Panel focused on the electrification of multifamily buildings, to featuring Mayor Mahan at our 2023 Housing the Bay Summit, to our latest Homeless to Housed initiative, which will help to connect places of worship with homeless services providers and nonprofit developers, ULI is committed to supporting Bay Area cities like San José in multiple ways.

Rosalynn Hughey, San José Deputy City Manager and ULI SF Executive Board Member and DEI Committee Co-Chair, states “These projects, along with the electrification of Caltrain, arrival of BART, and a boomlet in food options and outdoor activities give the City of San José much to be excited about for the current state and future of Downtown San José. We appreciate the support and strong partnership with ULI in helping make the future bright for the cultural heart of Silicon Valley.”

Join us on September 21 at the Julia Morgan Ballroom in downtown San Francisco to celebrate San José and members and guests of ULI SF! Register today to secure your ticket for this not-to-be-missed event!