Commercial Real Estate Blog

KT Properties has acquired the property locatd at 1 South Market St in Downtown San Jose from Haury Properties. Plans for the site include high-rise condominiums but could be changed to office if the demand materializes. KT and its partners are currently developing the AXIS residential condo project located at Santa Clara and N Almaden Boulevard.

Haury originally had been holding the site for office development but later changed those plans into residential as the office market cooled.

The city seems to prefer that the 1 S Market site go office but it doesn’t make any sense at current rents Downtonw. Legacy is in the process of building the second tower at RiverPark on W San Carlos, and the BEA building is up in the air now that Oracle is acquiring them. In addition, Boston Properties and Barry Swenson control land downtown at a lower cost basis which could go office.

Over the past five years, a group of developers which included Shapell, Citation, and Keenan have been funding the planning process for Coyote Valley in South San Jose. The Coyote Valley has over the past two decades been considered as a place where companies could build additional campuses, with the latest campus plans belonging to Cisco Systems. Those plans fell apart in 2000, along with another Fremont campus Cisco had planned, after economic conditions changed.

Since then, developers have been funding the planning process to the tune of $17M. Another $2.5M was due to be funded, but in the light of the current housing and economic conditions the project is for now being put on hold because it is not economically viable.

The Coyote Valley plan called for as many as 25,000 housing units along with commercial space for 50,000 jobs. Because the city of San Jose requires that staff time be reimbursed, the developers have been footing much of the bill.

The developers will undoubtedly resurface once housing conditions stabilize, and possibly sooner if a large campus user is able to step up and commit to occupying a large campus in Coyote Valley, but for the time being, either scenario seems to be unlikely anytime soon.

Federal Realty, the owners of Santana Row have announced plans to build a 5-story office and retail project on a one-acre site within the complex.

The building will feature 4-stories of office in a 15,000 SF floor plate above 15,000 SF of ground floor retail. The steel construction building is estimated to cost approximately $42M and is anticipated to be complete by the end of 2009. The parking is already tight in Santana Row so FRIT (Federal Realty) has intentions to add a 90 car parking garage to what will likely be exclusive parking for the office tenant(s).

Rents have not yet been announced but based on the construction costs, it can be safe to assume that office lease rates will likely be at or north of $3.50 NNN.

We previously wrote a short piece on Vietnam Town’s troubles back in November about the work stoppage at the site and the lender halting payments.

It seems financial problems continue to affect the development now that some of the sub-contractors have filed to seek foreclosure of the site to satisfy monies they are owed for work.

There is no indication as to what exactly the issue is with the development, but a number of parties have not been paid and to date only one of those has filed to seek foreclosure. TWN Investments also represents some of the investors in the Vallco Mall project which has seen its own share of problems. Vallco has recently gone through a restructuring seeing some of the assets being sold to Orbit Resources and Fred Chan.

The California High Speed Rail Authority has voted to include San Jose on the San Francisco-to-Los Angeles High Speed Rail that it is planning. The 200MPH rail was voted to travel through San Jose’s Diridon station which at some point is slated to become a stop for VTA, CalTrain,AltaMont, and BART trains.

The cost of the project is $30B and will include $10B of funding coming from state issued bonds which will likely go up for vote in 2008.

Boston Properties has closed on their purchase of North First Business Park in San Jose. The park is comprised of eight office and R&D buildings totalling 367,000 square feet on 24 acres of land. The seller was an affiliate of Goldman Sachs.

The property is bound by Zanker Road, Daggett Drive, and First Street. Boston Properties’s plans for the property are to redevelop the site into approximately 1.4 million square feet of Class A Office Space.

The park is mostly vacant and it is unclear when Boston intends on redeveloping the site, but it should be noted that a large number of parcels of property have changed hands in the North First Street area recently, and most of the properties include plans to redevelop into Class A office space. It will be interesting to see if the forecasts for Class A space demand will mesh with all the developers who intend on delivering millions of square feet of such space over the next 2-4 years.

Atmel is also currently marketing its headquarters and an adjacent 11 vacant acres of land for sale. The company likely intends on relocating into a smaller Class A headquarters environment somewhere along the 101 corridor in Santa Clara, San Jose, or Milpitas.

Construction on Vietnam Town has been halted during the past 2 months or so. The slow pace of work has apparently caused the lender, United Commercial Bank, to halt disbursements until the issues which have caused the delays and slow pace of work to be resolved.

Vietnam Town in San Jose is a multi-tenant, 275,000 SF, retail condominium project. Units are sold in roughly 1,000 SF size ranges and asking prices are in the $500 psf range. The center is one of the first for-sale commercial condominiums targeting retail. In the past several years office and industrial condominium development gained in popularity and several projects sold out.

Vietnam Town, which is located on 20 Acres on Story Road is being developed by TWN Investments and is being constructed by Reeve-Knight Construction. According to the developers, more than half of the center has already been sold.