Special Report: Living In Downtown San Jose

A LOCKHEED retiree, Dennis Hickey is a member of the San José Rep and The Tech and regularly jumps on the Light Rail or walks to theaters and museums in downtown San José, but longs for the day when he can even more conveniently hail a cab from a curb near his St. James Square condo.

Johnny Martin and his wife Evangeline Seet are remodeling a North Second Street home to boost its livability as well as its value. Martin is CEO of Xmlify, a small software development firm just a few blocks south on the same street. In the short distance between home and work, however, lies St. James Park, a historic city square Martin calls a "freaking disaster" he won't let his two school aged kids visit.

Also downtown San José residents, Farrell Podgorsek and her husband Ken, president of the Campus Community Association, always wanted a home with the character they found in a 1908 Naglee Park Craftsman. They enjoy short walks to downtown activities and they appreciate their tight-knit neighborhood of homes. Unfortunately, rising housing costs is making it more and more difficult for newcomers to share their urban lifestyle.

"My gut feeling is that over the next five years there's going to be quite a real estate boom downtown and we are going to get pretty congested. Yes, I'd like to see that (St. James) park opened up, but as much pain as redevelopment is causing, it's a much better place to live than it was 30 years ago," said Podgorsek.

San José's center city residents don't mince words about the down side of living downtown. Like urban residents everywhere, they navigate noisy construction sites, bristle about traffic and parking problems and they want pockets of blight to quickly disappear.

Yet when the dust settles, few would live elsewhere.

"Downtown San José is cool," says Martin.

San José's downtown is roughly the area bounded by Julian Street to the north, Interstate 280 to the south, Fourth Street to the east and Highway 87 to the West. It's next door to San José State University, it brushes against ethnically diverse, historical neighborhoods and a river runs through it. The downtown area is just a few blocks southeast of the city's original Guadalupe River settlement site.

Downtown then and now

What's "cool" about downtown is pretty much what's cool about many urban centers -- diverse neighborhoods share space with commercial, retail, cultural and social activities, residents both live and work there and people rub elbows.

San José also has something major cities with populations of 250,000 or more don't -- the nation's lowest crime rate, according to the Federal Bureau of Investigations.

"People feel safe on a 24 hour basis," says Michael Mullinix, president of the Santa Clara County Association of Realtors.

"If you look at other examples (of downtown communities) we have not achieved everything, but we are making very good strides in that direction," said Mullinix, also owner of Mullinix Commercial Real Estate in Campbell.

San José is in the final decades of a multi-billion dollar redevelopment effort and downtown is the centerpiece. Operating with a current budget of $2.6 billion for the city's rejuvenation, redevelopment began decades ago in 1956 after urban flight spawned surrounding suburban bedroom communities that left downtown boarded up, dark and unsafe.

In the past decade, with "San José is Growing Up" as it's theme, redevelopment constructed a light rail system, a leading West Coast convention center, a professional sports and concert arena, new and refurbished hotels, a new home for the San José Rep, new museums for kids, technology buffs and art fans, improved neighborhoods, face lifts for historic structures and streetscapes and more.

"Our next step is to work with Palladium (developers) and the downtown community to create a thriving retail district, integrating our historic assets with new housing and entertainment venues," said Susan Shick, executive director of San Jose Redevlopment Agency.

As redevelopment gathers steam to reach its goal of building a thriving, vital city core reminiscent of the town's 1900-1950 bustling lifestyle, a new 10-year plan is designed to put the finishing touches on what city planners hope will be a pedestrian-friendly urbanscape of more homes, more places to shop and more places that don't shut down before bedtime.

Redevelopment's ground zero is a core area stretching from Market Street to Fourth Street and San Fernando Street almost to St. John Street where a minimum 1.6 million square feet of development will include commercial, residential, entertainment and retail projects.

Outside the core, there's more. A Fairmont Hotel addition is underway and there are plans for three new hotels, nearly 5.5 million square feet of office space, more public parking, restoration of the Fox and San José theaters, expanded light rail lines and a BART connector.

Also on the drawing board is a nine-level, 475,000 square foot City of San José-San José State joint library project and a new 550,000 square foot Civic Center with a City Hall, Symphony Hall and Music Education Center.

"Over the next 10 years you are going to have projects all happening at the same time and it's going to have the potential to create a real problem," says Podgorsek.

"There are a lot of committees working hard to try to mitigate that, but it might just be sort of like the little boy with his finger in the dike. If you think it's bad at the Opus building (next door to the refurbished DeAnza Hotel) now, wait until they have city hall, the library and new parking going all at the same time," he added.

A new plan

Key to the success of redevelopment's latest plans in the core is the level of square footage planned for housing -- 65 percent -- and for retail -- 21 percent.

The plans are the result of an Urban Land Institute study "Downtown San Jose, CA: Enriching the Quality of Retail Revitalization" -- at the city's invitation -- to develop in the core, an urban/mixed use project with at least 300,000 square feet of retail space, augmented by an additional 1.3 million square feet for office space and hundreds of homes as a catalyst to wake up downtown San José.

The reason for the combination is obvious -- now.

"Certainly, the retail benefit is obvious and that's one of the main reasons for such a focus on building up residency in downtown...so there are customers," said Noelle Knell spokeswoman for the San José Downtown Association.

Despite millions spent to enliven downtown, it has remained much less vibrant than other cities of its size.

Years ago, the Pavilion, an outdoor mall across First Street from the Fairmont Hotel, offered limited, boutique-style shopping without a major retail anchor when residents of nearby neighborhoods were largely blue collar workers.

Escalating rents, costly mandatory earthquake retrofits, and the combination of prolonged construction and a lack of mall-like parking frustrated patrons and forced many merchants to close up shop before they could realize the proposed benefits of redevelopment.

Even now, until restaurants and night clubs open for the evening, shopping opportunities and other end-of-work day attractions downtown have been insufficient to keep workers downtown or consistently attract large numbers of nearby residents.

"On weekends it is so quiet that I have to remind myself that I am living at Ground Zero in Silicon Valley," said Naglee Park resident April Halberstadt.

Housing component

Downtown is a tough draw for the demographic crowd with a penchant for shopping. Young families with kids want to be near retail centers, but schools with competitive test scores are more important.

"The prototypical software engineer with a couple of kids, they are not moving downtown. It's not to say there aren't people with families down here, but this is a decision some families have to make," says says longtime Naglee Park resident and real estate broker John V. Pinto.

Those who moved downtown in the last decade, however, have enjoyed a relative lower cost of housing.

By the end of 2000, the median price on closed sales of single-family homes was $499,000 in San José, compared to $522,400 in Santa Clara, $552,500 in Campbell, $631,000 in Sunnyvale, $710,000 in Los Gatos and almost $1.4 million in Saratoga, according to realty statistician Richard Calhoun, broker-owner of Creekside Realty in San José.

The city's downtown core suffers the same housing shortage that plagues Silicon Valley, but the area offers one of the valley's widest range of housing types from temporary rental homes for San José State University students and teachers to million dollar Victorians. Downtown is home of the city's largest stock of historically and architecturally significant older homes, nestled alongside newer infill condo, town home, small single-family home and apartment developments.

"Using my house for example, it probably would cost two to three times more in Saratoga or Los Gatos or Palo Alto where you'd have to spend a lot more money to be a lot further away from where things are happening," Pinto said.

While housing is comparatively cheaper in San José, existing home prices downtown have soared along with the rest of Silicon Valley.

John Olson, an engineer with Agile Software downtown, purchased a downtown San José home in the mid-1990s for about $250,000. A similar house in the neighborhood recently sold for $700,000, says Olson.

"I landed in Naglee Park without any idea of what it was or how lucky I was. I thought, at the time, it seemed like a pretty safe risk. Of course, it has turned out to be wonderful, mainly because of the unusually interesting and involved people here. And, in retrospect, 1994 was the best financial window to jump through, so I really lucked out there too," said Olson.

Redevelopment has subsidized development of hundreds of low- to moderate-income housing units, but most new downtown housing has sold or rented at market rates.

In February, the new 101 San Fernando Apartments, for example, offered 560 square foot studios for $1,200 a month. One bedroom units start at $2,0000 and three-bedroom units were $3,775.

Next door, at Paseo Villas, 104 units raging in size from 1,600 to 1,900 square feet were sold or reserved for an average exceeding $400,000 before the development was completed.

In February, a Redevelopment Agency study reported new downtown homes -- often high density condos and town homes cost as much as $500,000 and rentals were as high as $1,600 for 750 square feet.

In January, the ULI study and San José's ongoing housing crisis prompted San José Mayor Ron Gonzales to allocate $10 million of additional Redevelopment Agency funds specifically to develop affordable housing for those earning less than 30 percent of the median income -- often teachers, police officers, waiters, and other service personnel vital to a thriving community.

In 1999, the city had already allocated $24.9 million for extremely low-income families and contributed $1 million to the Silicon Valley Housing Trust Fund for first-time home buyer programs.

Unfortunately, the level of housing planners say will pump up downtown's vitality remains years away.

"In this area, all we can do is move forward as aggressively as possible and try to get new developments up. Space is limited and land is at a premium, but housing is one of the priorities of development," said Knell.

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Originally published June 30, 2001.

Broderick Perkins executive editor of DeadlineNews.Com, has been a consumer and real estate journalist for 25 years. His award-winning work has appeared in major-market newspapers and leading realty Web sites.

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