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Lease Deals Point to Positive Signs for Downtown San Jose

San Jose City Hall will be home to the United States Patent and Trademark Office's new West Coast satellite office. Photo by Flickr user Steven Christenson

Two big lease deals in downtown San Jose indicate that the city center’s underappreciated assets may be proving attractive to those seeking more urban workplaces in Silicon Valley. Apigee, Inc., an enterprise API management company, recently signed a lease with Equity Office for a 41,000-square-foot space at 10 Almaden — downtown’s biggest new lease in nine years. And the United States Patent and Trademark Office will establish a 40,000-square-foot satellite office in San Jose’s City Hall building.

The patent office considered other cities on the peninsula, including Sunnyvale and Santa Clara, before selecting San Jose. Apigee is moving from Palo Alto. Why did these two tenants choose downtown San Jose over nearby competitors? Four things attracted these tenants to downtown San Jose: access to transit, urban amenities, real estate costs and a responsive government. As we have noted in our reports The Urban Future of Work and Getting to Great Places, more and more firms today are seeking the benefits of urbanism.

Access to public transportation. Downtown San Jose is the biggest transit hub in the South Bay, and Diridon Station has the most frequent Caltrain service. With 20 percent of its work force commuting from San Francisco, Apigee saw Diridon’s regular Baby Bullet Caltrain service as a step up from the limited service at the firm’s current location near the California Avenue Caltrain station in Palo Alto.

The patent office, which will serve as the West Coast regional office (one of four satellite offices nationally), was looking for an urban center in Silicon Valley that was easily accessible by transit. Downtown has many transit connections to the region and beyond, including the Altamont Corridor Express (ACE) and Amtrak’s Capital Corridor routes to Sacramento and the Central Valley. Future plans for high-speed rail and BART will only strengthen downtown’s transit connections.

The largest collection of urban amenities in the South Bay. Downtown San Jose’s walkable core is the largest in the South Bay and houses more restaurants, bars and entertainment options than any other South Bay center. It is also the home of San Jose State University, a school with nearly 30,000 students. This appealed to the patent office, which was looking for the opportunity to partner with a university.

Supply of reasonably priced real estate. For Apigee, San Jose’s low real estate price tag (Class A office space averaged $2.72 per square foot in the third quarter of 2013), was undeniably more cost-effective than Palo Alto’s (at $6.29 per square foot), especially with the company’s ambitions for growth. (Apigee’s current home at 260 Sheridan is maxed out.)

The patent office was especially attracted to the nearby supply of reasonably priced housing stock. Cost of living for patent office employees was a key criteria in the selection process. Downtown San Jose has the largest collection of high-rise residential buildings in the South Bay, with more in the works. It is also surrounded by several historic neighborhoods with pre-war homes.

Responsive government. San Jose’s leadership role in attracting the patent office is worth noting. To compete with other Silicon Valley locations, the city offered two years of free rent and reduced rent for an additional three years.

These two deals are a significant win for downtown San Jose. Over the coming year, we hope to see more employers choose downtown as the accessible, amenity-rich urban alternative in Silicon Valley.