As San Jose braces for growth, leaders talk how to balance community impacts

When it comes to new office and residential development, San Jose has become the proverbial belle of the South Bay ball after about a decade of almost no commercial growth in the city’s downtown core.

Officials, urban planners, business leaders and residents are bracing for proposals that could double the amount of office space in the city’s downtown core over the next decade and add as many as 18,000 new homes. Major steps to bring all of that to fruition will happen later this year, when San Jose elected officials vote on a plan to increase building height limits and add density to the city’s downtown zoning code.

“We really want to continue to help build momentum, but also really address some of the concerns that people have about affordability and displacement and what it really means to create a new city center that includes us all,” said Teresa Alvarado, San Jose director for SPUR, an urban planning thinktank, which hosted a real estate forecast Thursday with commercial brokerage CBRE.

Currently city leaders are trying to push forward projects throughout the downtown, but are also making efforts to address displacement concerns, said Kim Walesh, deputy city manager and economic development director for San Jose.

“The top priority in the near-term is to support all of the projects underway in the core and to make sure that they get under construction,” she said. “Our strategy has always been to densify and fill in the core and then to expand to the Downtown West and then to integrate it all.”

San Jose leaders will also decide whether or not to move forward with a 60-acre redevelopment by Google near Diridon Station on the west side of downtown — called Downtown West — that could bring as much as 7.3 million square feet of office space and 5,900 residential units alongside park land, retail and hotels.

Notably, Mountain View-based Google has said publicly that it does not intend to build to those maximums, which are being analyzed in its current environmental study for the project, but time will tell what the final proposal will be when it comes before the City Council for a vote before the end of the year.

“This is a true undertaking of gargantuan proportions,” said Jefrey Henderson, executive vice president at CBRE. “As all of the other development and office pipelines deliver, there will be an ugly word of gentrification thrown around a lot, but we believe Google is stepping up to the plate, as well as other developers, and more importantly tenants that will come into this marketplace.”

Indeed, San Jose city leaders are responding to community feedback and concern over future displacement while business leaders aim to push forward long-stalled projects and new interest in the city before the next economic downturn, which most analysts don’t anticipate in the next 12 months.

San Jose’s “inclusionary housing” ordinance — which requires developers to build a certain number of affordable units in housing projects — is 15 percent across the city, but officials are working on increasing it to 25 percent in the Diridon Station Area. Elected officials in the coming months will also mull a new “linkage fee” that would be charged to new commercial developments to fund affordable housing.

Finally, San Jose officials have recently launched a series of study sessions and community meetings on anti-displacement and will be presenting to the City Council in April a broader strategy around preventing displacement as the city grows, Walesh said.

“We’ve always wanted more types of companies here; we’ve always wanted transit investment, so we’re going to secure a lot more planned investments,” she said. “But how do we … maximize the opportunities for the residents who are already here and how do we minimize or prevent the negative impacts of growth that will affect our most vulnerable residents so that they can succeed in our changing community?”

The next two anti-displacement community meetings will be held Jan. 28 from 10 a.m. to noon at the MLK Library and Feb. 5 from 6:30 to 8:30 p.m. in the Mexican Heritage Plaza at 1700 Alum Rock Ave.

Meanwhile, business leaders are touting the unprecedented interest in the city and Silicon Valley’s unique place in the market at the moment.

CBRE is tracking 15 commercial developments and about 60 residential projects in the downtown San Jose pipeline. That means the projects are recently completed, under construction, approved or proposed by developers.

In the meantime, the existing Class A office space in the downtown core is maxed out, minus about 58,000 square feet on two floors in the office building at 225 W. Santa Clara St., said Vincent Scott, executive vice president at CBRE.

“Anyone who wants more than that, they have to go build-to suit, or what’s under construction,” he said. “It has prevented some big names from coming downtown just from a deliverability standpoint, but when those (new projects) are construction, they will come — we feel strongly about that.”

Indeed, Henderson called San Jose the “shining star” in terms of its demand from companies, particularly as big tech continues to scoop up millions of square feet in office space and expand its footprints across the South Bay.

“We’re excited to hear about the projects that are coming,” Alvarado said. “But also we want to be a resource for you when you’re thinking about and experiencing the challenges of … how they’re responding in the community. We have to address those. We have to build upon those.”

Contact Janice Bitters at [email protected] or follow @JaniceBitters on Twitter.