An Up Market Brings Housing, but Not Jobs, to Downtown San Jose
May 7, 2015

Photo by Sergio Ruiz

2014 was the hottest recent year for real estate in downtown San Jose. Spurred by the city’s high-rise incentive program, hundreds of residential units broke ground in new apartment towers, with several thousand more approved. Even the sluggish commercial market woke up. While no new office buildings were proposed, commercial vacancies declined and the asking rents of commercial office space per square foot continued to increase.

We celebrate this new growth. During 2014, just over 2,000 housing units were planned or under construction in downtown San Jose. An estimated 3,300 more units are in the pipeline. Within a few years, the city will be halfway to its goal of getting 10,360 new housing units downtown — 20 years ahead of schedule.

While having high-density housing in the transit-rich downtown is great, we are concerned about the long-term availability of land for jobs — specifically sites that can accommodate large floorplate office buildings near future BART stations. In March 2014, SPUR released The Future of Downtown San Jose, which presented six big ideas and 25 recommendations for achieving a more successful urban center for the South Bay. Our first big idea was to welcome all kinds of uses into downtown but to hold out for jobs near regional transit. Specifically, we recommended that the parcels within a quarter mile of Caltrain and BART stations emphasize employment uses. Studies show that people are more likely to take transit when it is close to their jobs rather than close to their homes. Beyond a quarter mile, we felt the market should decide the mix of housing and jobs, but we recommended that the city maximize the density of each project.

Downtown San Jose is where the South Bay’s entire transit network comes together (Caltrain, VTA light rail and, in the future, BART). This small area has less than 40,000 jobs today. (That’s less than half the number of jobs in downtown Oakland and about one-eighth of the jobs in downtown San Francisco). Our report, which included an analysis of land uses downtown, found that there is a real opportunity to add jobs on downtown’s many unbuilt sites near regional transit.

This year we updated that analysis to include development completed or approved in the last year. (See map below.) We found that more than 600 of the 2,000 new housing units constructed or proposed in 2014 are within a five-minute walk (i.e., a quarter mile) of Diridon Station or the proposed downtown BART station. These include the Marshall Squares Project on St. John Street, the Donner Lofts on St. John Street and the recently completed One South Market tower at Market and Santa Clara streets.

Available Development Sites Near Regional Transit

Downtown has a number of large unbuilt sites within a half mile of Caltrain and future BART stations. SPUR recommends reserving sites for jobs within a quarter mile of regional transit. Beyond a quarter-mile of regional transit, we are agnostic about use but recommend that the city require the maximum possible density for developments within a half-mile of regional transit.

Right now, the city’s downtown zoning classification allows commercial or residential uses in any place designated in the general plan as “downtown." Ironically, although the issue of the balance between jobs and housing is a major citywide concern — and has led to restrictions on housing in urban villages elsewhere in the city — the dominant city policy approach to downtown remains market-oriented. But if the city does not reserve sites near regional transit for employment uses, it will put the future success of BART at risk. Quite simply, if there aren’t enough jobs in downtown, there won’t be enough riders on BART.

The city’s current policy doesn’t have any restrictions in downtown and welcomes almost any use on any site. In other words, the policy appears to be: The more people located downtown, the more jobs will follow. While we agree that downtown San Jose needs many more people — and lots more housing is part of the answer — we don’t think this has to come at the expense of using the best office sites for housing.

SPUR believes that the city’s jobs-first policy should reserve sufficient land near regional transit for high-density, job-generating uses. Some of the best sites for offices have already been developed for housing. For example, in 2013, the city approved a residential tower on one of the most viable sites for commercial development in downtown San Jose, One South Market, at the corner of Market and Santa Clara — a site on top of what may be the downtown BART station.

SPUR supports bringing lots of housing to downtown San Jose — as long as it is as dense as possible and as long as it is more than a quarter-mile from transit. But as the downtown market heats up, the city should make sure that key transit-oriented large parcels are reserved for jobs. The Mitchell Block between First and Market streets and north of Santa Clara Street is one of them. If portions of this site become residential — or if buildings on the site are converted to residential — then it impedes the ability for the rest of the site to be a viable development opportunity for jobs. The city needs to stand by its vision for the future of downtown San Jose and reserve such sites for commercial development.

San Jose is at the center of the most important transportation investments that the South Bay will see for decades. Diridon Station is already a transit hub with four regional transit lines and several regional bus lines, and it will be even more important with the addition of high-speed rail and BART. Phase II of the 16-mile extension of BART into Santa Clara County is scheduled to come to downtown San Jose in 2025. If San Jose does not put the right land use in place to ensure enough riders on the trains, BART will not be able to deliver what the city hopes it will bring. 

The issue of holding out for jobs is a common refrain in San Jose, particularly around the city’s budget. Without enough jobs that are transit-accessible in downtown, BART to San Jose cannot sustain itself. Many other places in the city are great places for housing, including many of the urban villages. But in downtown, policy makers need to weigh the long-term merits of encouraging jobs near transit.

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