Saturday, August 07, 2010

San Jose downtown rebirth

The article about San Jose downtown rebirth that recently published in the New York Times.

With the goal of creating as many as 10,000 apartments, the city began waiving affordable housing requirements in 2004. Developers fell in line to get approval for the first high-rise towers to be built in this sprawling suburban city, the country’s 10th-largest with a population of just under 1 million.

Though builders nationwide began pulling back from condominiums in 2006, some San Jose developers persisted. By 2007, 20 towers were reported to be in various stages of development. But just four projects of about 20 stories each were built — City Heights with 124 units; Axis with 329 units; The 88 with 197 units; and 360 Residences with 213 units, which opened in May. The complexes offer amenities like pools, fitness centers and doormen.

“Unfortunately, they’re coming to market at one of the most miserable times,” said Shiloh Ballard, the director of housing and community development for the Silicon Valley Leadership Group, a consortium of area business executives. “If they had come to market three years ago, all the units would have sold.”

As it stands, much of the market envisioned for the condo units — young, well-paid, single technology workers seeking an urban lifestyle who often land in San Francisco — has disappeared. They have either been laid off, suffered salary cuts or, since housing prices have fallen throughout the Bay Area, now can afford San Francisco.

The remaining potential buyers have apparently thought twice about paying as much as $700 a square foot for a high-rise condo in a market where the going rate for low-rise apartments has been at most $425.

Still, some of the high-rise developments got to market early enough to attract prerecession buyers. Construction on City Heights, developed by Mr. Swenson’s company, began in June 2005, and half its 124 units were sold by November 2007 before sales stalled, the developer said.

Guerrilla marketing tactics (including a fake picket line of “protesters” seeking “better views” to attract the attention of potential buyers) and steep price cuts to $372 a square foot have been required to move the remaining units. Penthouses originally priced as high as $1.4 million were reduced to the $600,000 range. The building is more than 80 percent sold, Mr. Swenson said, and prices have reverted to the original $550 a square foot.

Wilson Meany Sullivan, a developer based in San Francisco, built a parking garage and installed a Safeway as part of constructing the 197-unit 88, which is near San Jose State University. Plans for a second high-rise tower have been deferred for now, said Seth Bland, a partner in the development group.

Mr. Bland said the developers tried to import the sort of product — and prices — more typical of San Francisco. Purchase prices for studio apartments start in the high $200,000s, and penthouses go for more than $2 million. The building is more than half sold, said Paul A. Zeger, the president of Pacific Marketing Associates, which is marketing The 88.

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