Putting The Pandemic Behind It, San Jose Goes All-In On Its Downtown

Downtowns across the country are facing an existential reset after the shock of the pandemic and its yearslong ripple effects. In San Jose, city leaders are going all-in on their downtown, offering business incentives and focusing on safety, cleanliness and boosting local retailers.

Through these efforts, San Jose is hoping not just to seize a chance to reimagine itself in a new normal but also to build back its downtown office and retail markets, which were poised for big change in the years leading up to the pandemic.

“I credit our pivot to an all-of-the-above approach, where rather than just a one-size-fits-all approach, we're not only going to build brand-new apartments, which are very slow to build and expensive, we've been building a lot of interim housing and different forms of shelter, safe parking and just accelerating the rate at which we stabilize people. So I think that's a big part of it,” San Jose Mayor Matt Mahan told Bisnow earlier this month.

Serving as the headquarters for foundational Silicon Valley titans like Adobe, Cisco and Nvidia, San Jose fell into San Francisco’s shadow in the 2010s as the new guard of tech flooded into shiny towers in the City by the Bay. Today, as San Francisco struggles to shake the effects of hybrid work, San Jose is meeting the challenges of today’s cities head-on, starting with addressing homelessness.

With a combination of apartment construction, interim housing and city land deals that allow people to live in recreational vehicles, San Jose is taking a multipronged approach, Mahan said during a walking tour with Bisnow earlier this month, demonstrating his familiarity with a dozen different business owners through handshakes and high-fives along the way.

The number of people without homes dropped by 15% in the last two years, he said. 

“In addition to starting to get a better handle on our homelessness crisis, we've put a real emphasis on a set of safe and clean strategies downtown,” Mahan said. “We’ve beefed up downtown walking patrol through our police department. We've also budgeted to have our community service officers on bikes.”

Mahan credited a downtown business improvement district consisting of property owners and led by the Downtown San Jose Association for improving the central business district.

The privately held Property-Based Improvement District “provides enhanced maintenance, public safety, beautification and economic development programs above and beyond those provided by the City of San Jose,” according to its website.

Groundwerx cleaning and safety ambassadors hit the streets daily to provide tree trimming and care, homeless assistance, business development and street life projects such as wall murals, crosswalk decor and decorative lighting.

“They’re out here every day in the morning, power washing the streets, painting over graffiti, picking up trash and checking in,” Mahan said.

A package of incentives passed in September aims to build up business in the cleaned and beautified downtown. 

The city council passed a law giving two years of free parking in city-owned garages to new businesses that move into downtown and sign an office lease of four or more years or buy and occupy a space.

The city will also waive those companies' business tax for two years. 

“These incentives are meant to be one more reason to check out office space downtown and consider being here,” Mahan said.  

Lease terms of four years will bring the most committed companies downtown, he said. 

“When you have empty storefronts, it's a loss for everybody. It's a loss in terms of vibrancy,” Mahan said. “We get zero sales tax revenue or business taxes, and the property owner is not making any money. So everybody giving a little is creating an opportunity for new businesses to be born in our downtown. And some, we think, will thrive.”

Among the new businesses taking advantage of the efforts is Migi Cera Candles, which opened in a storefront in Moment DTSJ, a collective of stores owned by local artisans in San Pedro Square.

“I didn't know that making candles in my kitchen would turn into this,” Migi Cera owner Marcelina Castro told Bisnow. 

“At first I was scared, but it’s been going really well,” she said of opening her first retail location. “We’ve been meeting a lot of people and getting our name out there.”

Moment DTSJ, owned by Moveable Inc., helped by creating email marketing campaigns announcing the new vendor’s storefront in the San Pedro Square neighborhood. 

“They’ve really given us more exposure. It's a dream,” Castro said. 

One local brokerage executive said the development of high-rise downtown housing and CBD retail has brought nighttime foot traffic back.

“All the residential towers came in at the onset of Covid, and there were suddenly a lot of people downtown,” JLL Managing Director Sean Toomey said.

This summer, Throckmorton Partners and San Jose State University converted a hotel into a 700-bed student housing project in downtown San Jose, marking the biggest housing conversion in the Bay Area since the pandemic, according to the San Francisco Chronicle.

San Jose State University serves as an anchor to downtown San Jose, and plenty of students were milling about downtown.

Last fall, enrollment at SJSU totaled more than 27,000 students, according to U.S. News & World Report. It is also ranked No. 3 on a list of the top public schools in the U.S.

But even with these efforts in place, downtown San Jose isn’t immune to the challenges plaguing downtowns across the country. The office market has faced significant challenges in the form of hybrid work policies, shrinking corporate real estate appetites and increased competition from other office submarkets, according to a city memo dated Sept. 9. The office vacancy rate in the third quarter reached 32.7%, according to CBRE.

Prolonged hybrid work is impacting downtown San Jose just like almost every other U.S. city. San Jose’s efforts help, but businesses bringing employees back to the office is another potential boost.

“Businesses that encourage their employees to return to the office will help,” Toomey said. “The combination of a safer downtown, an easier way of getting there with the VTA, buses, BART and CalTrain, I think you're going to see a resurgence of businesses coming downtown.”