Silicon Valley Cities See Spike In Office Demolitions

A wave of upzoning across the San Francisco Peninsula is cracking open some of the region’s most supply‑starved housing markets, prompting multifamily developers to target obsolete office sites in Sunnyvale, San Mateo and Menlo Park for hundreds of new apartment units.

Cities up and down the Highway 101 corridor are under pressure from the state to meet aggressive Housing Element requirements, and the combination of rising demand, favorable zoning and a shrinking pool of viable office stock is accelerating a new class of demolition‑to‑multifamily projects.

“Rents have appreciated significantly, and with limited new construction starts, we’re anticipating rent growth to continue,” said Tom Holt, partner with Dallas-based real estate development firm Beam Reach, which has two projects underway in the area. “The combination of upzoning to allow multifamily use and maximize density within a podium structure and rents increasing is what's getting these deals to work for us.”

Sunnyvale, Menlo Park and San Mateo are seeing a new crop of proposals that replace outdated office buildings with mid-rise apartment communities, while a handful of taller office towers with favorable layouts are being repositioned into housing. 

Bay Area apartment rents have snapped back with remarkable speed, driven by tight inventory and surging demand in both San Jose and San Francisco. San Jose’s vacancy has compressed below 3.5% as rents climbed 4.4% year-over-year, while San Francisco’s resurgence has pushed average rents up 5.2% and vacancy down to the mid‑3% range across the city and San Mateo County, according to Marcus & Millichap.

Rising rents help some conversion projects pencil, as does razing obsolete buildings rather than trying to convert them. Beam Reach plans to demolish single-story concrete buildings at 1215 Bordeaux Drive in Sunnyvale and 155 Jefferson Drive in Menlo Park and build five-story apartment buildings in their place. Combined, the two projects account for 472 new doors, including 61 affordable housing units.

As lower-tier office stock across the country has languished in the pandemic’s wake, demolition has become more palatable for many developers. A full teardown means they don’t have to contend with common conversion challenges such as floor plate restrictions, lack of parking and unfavorable interior configurations. 

Beam Reach is also lining up its project with Sunnyvale’s requirement to add 11,966 new homes by 2031 as mandated by the California Department of Housing and Community Development’s 2023-2031 Housing Element.

To meet the housing goals laid out by the state, cities such as Sunnyvale and San Mateo have passed new rules easing the housing development process in certain corridors, and the state passed Senate Bill 79 last fall to boost housing density near transit.

The upzoning has helped developers aggressively pursue conversion and new multifamily projects. To date, the city of San Mateo has seen applications for entitlements of more than 5,000 new housing units.

Jemcor Development Partners is planning another demolition-to-residential conversion at 1700 El Camino Real in San Mateo. Jemcor’s conversion would scrape an existing five-story, 77K SF office building to create 705K SF of multifamily spanning 441 units over two eight-story buildings.

The first building would be a mix of one-, two- and three-bedroom apartments, while the second building would be 188 senior housing units.

O’Farrell Development has plans in with the city of San Mateo to raze a low-rise office building at 1919 O’Farrell St. and construct a seven-story, 87-unit apartment complex.

While demolition has become more common in the area, some developers are still taking the conversion route, leveraging the same market conditions.

Seattle-based Tourbineau Real Estate Partners plans to add 144 apartment doors by converting a vacant 12-story office building at 2121 El Camino Real into a mid-rise multifamily tower.

Most of the building’s tenants vacated during the pandemic, and Tourbineau acquired the 202K SF property along with six additional structures, including a 586-stall parking garage, in a deed-in-lieu-of-foreclosure arrangement in June 2025 for $22M.

The previous owner had committed nearly $16M in value-add improvements, including seismic-retrofitting the office tower, further enhancing the building’s viability for a residential conversion, said Tourbineau Chief Investment Officer Ben Wong.

“This building has near-perfect floor plates,” Wong said. “It’s a skinny rectangle, so we’re maximizing square footage. This project was in the right place, and it had plenty of parking. There are so many things that allowed us to say, ‘Hey, this thing works.’” 

Conversion projects don’t usually work well on larger office buildings because deeper interior spaces lack natural lighting, Wong added. The expansive window lines on the El Camino Real property combined with its shallow depth allow for ample light in living spaces, he said.

Even though the property aligns in many ways, the project still carries a great deal of added risk. Traditional investments have a much more straightforward basket of financial modeling assumptions, whereas conversions have multiple sticking points that could derail the project, Wong said.

The company also has the option to expand housing offerings on the existing footprint through a second phase on the 3.4-acre site.

“We want to solve Phase 1, and assuming we do, and there's positive market acceptance, we will move to a Phase 2,” Wong said.