Investors embrace downtown San Jose office to housing project switch

Investors in a huge downtown San Jose project have embraced plans to switch a proposed office tower to housing.

SAN JOSE — Investors in a huge downtown San Jose project have embraced plans to switch a proposed office tower to a residential complex with housing highrises, a developer says.

Initially, a real estate firm had proposed the development of an office tower at 147 East Santa Clara Street next to North Fourth Street and a residential tower at 95 North Fourth Street next to East St. John Street.

Urban Catalyst, as this news organization reported in September, now has proposed the concept of switching the office into a housing tower complex that could be built in one or two phases as highrises.

“With the current state of the office market, this is what we had to do,” said Erik Hayden, founder and managing partner with Urban Catalyst, the developer of the office tower at Fourth and Santa Clara and the nearby proposed residential tower at Fourth and St. John.

Urban Catalyst has also proposed several other downtown San Jose projects, including an under-construction hotel and a transformation of the long-shuttered Camera 12 movie house into a restaurant and office building.

The 20-story office tower would have totaled 525,000 square feet as originally proposed. Now it appears that it won’t be built.

Instead, Urban Catalyst is actively considering the development of 600 to 650 residential units on the site of the office tower.

Investors viewed the shift from offices to residential as a favorable tactic, according to Hayden.

“It’s being seen as a very positive change,” Hayden said. “The investors are telling us that this is the best news they have heard about the project so far, to switch to housing.”

The new tower would be 27 stories high, according to the new plans.

Urban Catalyst was formed to create funds that investors can use to capitalize on tax advantages provided by opportunity zones. Investors can capitalize on the tax advantages for projects that substantially redevelop a property.

The housing tower at North Fourth Street and East St. John Street won’t be altered. This would be a 26-story housing highrise with 389 residences.

These shifts are among the latest after-effects arising from the business lockdowns that state and local government officials imposed in the wake of the coronavirus outbreak in March 2020.

The shutdowns chased office employees out of their workplaces. Yet even after the coronavirus-linked restrictions were lifted, the return to the office has proceeded in an uneven and halting fashion at best.

Decisions by tech companies to slash their workforces as well as curb their respective appetites for office space have exacerbated the vacancy problems for office buildings.

“We decided to make the change to housing because the return to office never occurred in a meaningful way,” Hayden said.