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Silicon Valley Retail is Shifting. Here's Why it Matters.

The classic retail-meets-residential game may never be the same, and that's opening up a lot of new opportunities for developers. It's also posing some serious challenges.

Federal Realty Investment Trust Western Region COO Jan Sweetnam says there's big demand for office and residential tenants to be near hotels and retail, thanks to worsening traffic. Office workers just don't want to drive anymore. Jan has been working on the premier Santana Row project for 17 years and it's only halfway through (so far: about 70 shops, 20 restaurants, nine spas and salons). There's a push to add additional office space, as well as 1,000 residential units where Century Theater stands.

Sares Regis SVP David Hopkins (right) told attendees of Bisnow's Silicon Valley State of the Market event this month his company is hot on El Camino, where it has five active projects (two under construction and three in entitlements). The opportunities are there, and there's a tremendous amount of underutilized retail on El Camino. The challenge is size, as there are few large spaces available. He's had success taking 70 unit/acre projects down to 30 or less. 

Fairfield Residential SVP Brendan Hayes is using mixed-use as a way to encourage tenant retention, even restaurants that offer room service. One challenge he's facing when it comes to land buys is the level of competition. Brendan says never before has he had to compete with office developers, but now everyone is looking for land opportunities. That's driving the price up

Steinberg chairman Rob Steinberg says his architecture firm's focus is on high-density, high-rise urban mixed-use projects and its geographic footprint is expanding, with a new NYC office opening.

BSB senior development manager Joshua Burroughs says his company's been building for 100 years in NorCal, and he's currently bullish on San Jose. He's working on a tower in North San Pedro and the city is pushing for more street activation. Their solution: a little retail (2k SF) and a long line of bike storage and workshops to fit 300 bikes

Essex Property Trust EVP John Eudy (right, before the event) says his Palo Alto-based company started 30 years ago with five people sitting around a table trying to figure out how to make money. Now it's got 1,700 employees. It picks land in close proximity to transit and office spaces, with an added focus of retail on the ground floor. The worst move he can make is to overprogram retail into a residential format, because the last thing anyone wants are vacant storefronts. There's an effort to make it convenient for tenants so it's walkable and functions as an amenity and not just an income stream.