Silicon Valley mayors made their pitch to the real estate industry: We are moving in the right direction

Silicon Valley mayors made their pitch to the real estate industry: We are moving in the right direction

By Kevin V. Nguyen – Reporter, Silicon Valley Business Journal

The mayors of the South Bay’s three biggest cities have a message for the region’s real estate and construction industry leaders: Don’t focus on the negative headlines and short-term setbacks. Believe in Silicon Valley’s future.

The region and their particularly cities admittedly face challenges, most notably the housing crisis, mayors Matt Mahan of San Jose, Lisa Gillmor of Santa Clara and Larry Klein of Sunnyvale said in successive speeches Thursday at a luncheon hosted by the Building Owners and Managers Association at Downtown San Jose’s Westin hotel. But there are plenty of reasons to be optimistic about the future, they said.

“I want to meet you where you are and acknowledge that these are tough times in commercial real estate,” Mahan said. “But I’m trying to take a 10-year view on this. By all indications, I think we’re moving in the right direction. The investments will follow if we keep doing the basics right.”

San Jose, the region’s Goliath, faces some of its biggest challenges. Long quiet underdeveloped, its downtown core was hit hard when employers embraced remote work in the face of the Covid-19 pandemic. Developers have a massive amount of projects in the pipeline for the city’s core, but with interest rates up, office vacancies high and rising, and many office workers still working remotely, those projects are being put on ice.

Google LLC hit the brakes this spring on its mammoth Downtown West campus project near SAP Center. Boston Properties Inc. announced last month it’s halting development of its Platform 16 office project just north of there. And this week, Urban Catalyst managing partner Erik Hayden reportedly said the San Jose developer is second-guessing its plan to erect an office tower near City Hall.

Despite those setbacks, Mahan sees hope for the future. Downtown San Jose is starting to show signs of life again, he said.

“Cultural experiences are driving people back into Downtown,” Mahan said. “We are seeing vibrancy return from events and programming. From there, people are realizing (Downtown) is dense and walkable.”

Density and walkability, as opposed to car-centric sprawl, are two guiding principles informing new developments sprouting up in nearby Sunnyvale and Santa Clara.

San Jose Mayor Matt Mahan

Cities are aiming for density

Related Companies, for example, is developing a “a city-within-a-city” in Santa Clara on a former golf course and landfill just north of Levi’s Stadium. Its massive Reltated Santa Clara development, which got underway this year, could eventually be home to as much as 6 million square feet of office space and 3 million square feet of space for housing, retail, restaurants and hotels.

Meanwhile in Sunnyvale, CityLine, another city-within-a-city development that’s being spearheaded by Hunter Partners and Sares Regis Group of Northern California, is also well into construction.

And in July, Sunnyvale’s City Council gave its thumbs-up to a plan to remake Moffett Park in the northern part of the city. Under that plan the district could be transformed from a primarily industrial and office area that had no homes at all into a mixed-use community that has up to 20,000 residences.

“People want high density,” Gillmor said.

Santa Clara and Sunnyvale haven’t faced the same challenges with commercial space that San Jose has. The former has become ground zero for the Bay Area’s data center industry, in large part because Santa Clara, which owns its own electric company, can offer them reasonable power prices.

“We have our own power utility that is reliable, unlike say, PG&E,” Gillmor said cheekily as Mahan shook his head in laughter.

In Sunnyvale, large employers such Intuitive Surgical Inc., Google and Applied Materials Inc. have been growing their footprint.

Sunnyvale “gets little press because it’s a well-run city,” Klein said.

Sunnyvale Mayor Larry Klein

Compared to the development outlook of those cities, San Jose’s future may not appear as bright. But Mahan took issue with that notion.

“The headlines are too pessimistic,” he said. “We have very real challenges, but I do not believe we are in some kind of ‘doom-loop.'”

One of the key challenges facing all three cities — and one that was a common topic of discussion at the event — is the housing crisis. The mayors said their cities can’t solve that problem on their own.

“Ultimately, we need a statewide policy that we can enforce,” Mahan said. “But in order to do so, we need safe, dignified and affordable places to offer.”

“Talk to the county about these issues,” Klein added. “We don’t have the budgets to prop up lasting solutions on our own.”

For her part, Gillmor challenged the real estate industry to help out.

“What do we need?” Gillmor said. “It’s simple. More land. If there are property owners in your network with (underutilized) land, tell them to contact the city and county. Be a part of the solution.”

Leave a Reply

Your email address will not be published. Required fields are marked *