SAN JOSE — A huge tech campus proposed for downtown San Jose could be delayed for a few years, fresh evidence that the Bay Area’s wobbly office market and tricky economy continue to jolt real estate projects.
CityView Plaza, a massive office, retail and restaurant complex in downtown San Jose, is headed for a development delay. At full buildout, the project would total 3.4 million square feet.
Jay Paul Co., one of the Bay Area’s most successful and savvy real estate firms, owns the project site and intends to develop the property, which is bounded by South Almaden Boulevard, West San Fernando Street, South Market Street and Park Avenue.
The developer, acting through its affiliate SJ Cityview LLC, wants San Jose planners to authorize a five-year extension of a permit to develop the site, documents on file with city officials show.
The current development permit is slated to expire in June 2025. A five-year extension would mean the permit would then expire in June 2030, according to the city planning records.
Jay Paul Co. has completed an office tower at 200 Park Avenue, across the street from the CityView Plaza development site.
A delay for CityView Plaza appears to be a wise course of action for Jay Paul Co., in the view of Phil Mahoney, a Newmark commercial real estate agent who is one of the brokers attempting to find one or more tenants for the 200 Park office tower.
“It makes sense for Jay (Paul) to hold off on CityView,” said Mahoney, an executive vice chairman with Newmark’s San Jose office. “There’s no point to build more office space, given the demand right now.”
The Silicon Valley office market displayed some signs of modest improvement in the January-through-March first quarter of 2024, according to a preliminary report by CBRE, a commercial real estate firm.
The office availability rate for Silicon Valley was 20.8% in the first quarter, a modest improvement from the 21.1% availability rate in the October-through-December fourth quarter, CBRE reported. The availability rate measures the empty office space resulting from a combination of direct vacancies and sublease offerings.
“The Class A office market is showing some stability at present,” Mahoney said. “But it is still not easy to find tenants.”
Regarding the CityView Plaza project, Jay Paul Co. acknowledged the less-than-ideal state of the office market in the Bay Area, including Silicon Valley.
“Current financial markets and a reduced demand for office leasing have made the short-term leasing feasibility of this project untenable within the currently defined timeline,” Jay Paul Co. said in the filing with the city planners.
The Planning Department staff is expected to decide within about two months about the Jay Paul Co. request for a delay on the development permit.
Despite the delay, the real estate firm expressed enthusiasm about the project and its potential.
“(Jay Paul Co. affiliate) SJ Cityview LLC remains excited to bring this monumental project, along with its robust public improvements, to the city of San Jose in the near future,” the real estate firm stated in the planning documents.