What Silicon Valley Needs More Of
The tech hub's destiny is density, and without it Silicon Valley is going to continue to sprawl, according to panelists at Bisnow's Future of Silicon Valley event at the Santa Clara Marriott this morning. (A valley going skyward may sound oxymoronic, but you'll have to get over that.)
This is a unique place and microcosm for hoteliers, says T2 Development prez Mont Williamson. If you look at the last 10 years, demand has outpaced supply every year (aside from 2009 in the depths of the recession). As far as what hotel guests want? They don't want to be isolated in a field with a hotel and parking lot. They want a mixed-use environment, and he loves the concept of sending money into transportation projects, shuttle, and car share—not parking garages. A hotel, which can be popular with cities because of the transit-oriented tax, is a popular addition to a project to help it get entitled.
Our 300 guests heard San Jose Mayor Chuck Reed deliver an eye-opening keynote, reminding everyone that while times are good, they won't last forever. Every time he visits DC or Sacramento elected officials are shocked to hear that despite China and other countries nipping at Silicon Valley's heels, Silicon Valley's No. 1 threat is California and its biz-unfriendly tax and regulatory policies. (Cisco, the largest employer in San Jose, opted to add 450 jobs in North Carolina instead of right here.) He's open about sharing what the area's biggest secret is: its talent. Immigration policies need to be reformed to make it easier to let foreign talent live and work here, he adds.
Architectural Dimensions prez James Heilbronner, who moderated, has four hotels going on in Silicon Valley right now. (Monopoly has never seemed so relevant.) Some key 2013 stats about the area: per capita income exceeding $70k; software represents 44% of total VC investment in the region; and office space is dominating new commercial development. He assumes 2014 will be a banner year for the region.
SRS Real Estate Partners SVP Randol Mackley says Silicon Valley has more retail sales than his home state of Utah. (But one fewer Mormon Tabernacle Choirs.) Introducing ground-floor retail into mixed-use projects is a challenge because the experience of a building is really on the ground floor—if that's a failure, it gives the impression the entire project is a failure. It's an important amenity; residents too tired to cook want to ring downstairs to their favorite restaurant and have it delivered (same with dry cleaning). Randol expects to see better executions of mixed-use.
Sares Regis Group of Northern California VP of development Jeff Smith focuses on building housing in urban infill locations close to amenities. He gives a big shout-out to Redwood City, where Sares Regis did Township, the first of 2,000 units coming online downtown. The redevelopment of the theater and dining district there has helped attract residents. Lease-up started this year, and many renters work at Facebook and Google. His firm's bread and butter over the past few decades has been developing in Peninsula cities into true Silicon Valley, and during the last downturn some cos like his went after pots of gold in other areas like East Bay. He learned an important lesson to stick with what you are good at and don't get overextended.
While Redwood City is doing it right, Cornish & Carey Commercial EVP Phillip Mahoney says Palo Alto is an example of doing it wrong. (Look at Jay Paul's office plan there, which was withdrawn due to a bad political climate.) Density has to get heavier as projects get redeveloped near transit nodes. He grew up in a big city, so to him it's a no-brainer; if you don't want it, move to Des Moines. Phillip equates the current real estate boom to a rising tide that's lifting all geographic boats. One market that works for one social media company won't necessarily work for a solar company; it depends who your talent is.
Housing Trust Silicon Valley CEO Kevin Zwick can't think of any city in the world as large as San Jose with its kind of height limitations. He's happy SPUR recently planted a flag in San Jose, bringing together thought leaders, engineers, and groups like his to make changes towards smart growth. Affordability for housing is also a top issue. A two-bedroom averages more than $2,200/month, which requires a $75k income. While we have seen job growth, many pay less than $50k a year. We aren't creating the housing to support that, so people are overcrowding apartments in San Jose. (That could be good for sitcom premises, but not for families with kids.) Plus, spending half your income on rent leaves very little to support local biz.