If you have an office project you’d like to build in downtown Redwood City, you’d better get in line — and quick.
In the span of just a few days last month, city officials took in four office project applications totaling roughly 425,000 square feet for sites all within a couple blocks of each other. If they were all to be built, they would max out the city’s bank of available office space capacity there and then some.
“We went from about 50 percent to 120 percent” (of available office space allocation), Aaron Aknin, community development director for Redwood City, said last Thursday.
That number was pushed even higher late last week, after another developer submitted plans to build a fifth office project totaling about 60,0000 square feet.
The boom in office proposals comes as buzz is running high that developers of a large speculative office project downtown are very close to signing one tenant for the entire space. Called Crossing/900, it is the first major Class A office development downtown in years.
Also, some 1,400 new residential units — mostly rentals — are under construction in the city’s downtown, Aknin said, which will provide the kind of live-work environment that companies
want for their employees.
This spate of development is what city officials were hoping for when they approved a plan in 2012 that streamlined the development process for the once struggling district. The downtown plan provided an overall environmental review for the area and clearly laid out allowable density and forms.
“It generally created a lot of certainty because it said what you could do,” Aknin said. “It allows for a straightforward process.”
Mark J. Murray, a principal with Lane Partners, agreed. His firm has proposed a 180,000-square-foot office project at 2075 Broadway, across the street from the recently opened Old Spaghetti Factory. The building would be 90 feet tall, include some ground-floor retail and feature a neoclassical look in keeping with the historical feel of the area, while also being attractive to tech tenants, Murray said. KSH Architects is designing the building.
“We’ve been pursuing sites for probably over two years,” Murray said. “The biggest thing is it’s a Caltrain market. The competitive ones are Mountain View and Palo Alto, where it’s extremely expensive and there are very high barriers to market.”
Michael Halow, a founder and principal with Premia Capital, said office rents are now at the point where doing new construction makes sense, but remain low enough compared to Palo Alto to be attractive to tech tenants. His firm has submitted a proposal for a six-story, 69,000-square-foot office project on a parking lot at 550 Allerton. Premia is working with Form4 Architecture on the project, the firm that designed the NVidia headquarters in Santa Clara, and the Netflix campus in Los Gatos, both for the Sobrato Organization.
“We’re continuing to see compression out of Palo Alto and into Redwood City,” said Halow, whose firm has acquired three properties in downtown Redwood City since 2012, including the Allerton land.
“Rents have moved in the last 18 months from $3 net to $4.50 net, and they are probably going to continue to bridge the gap to Palo Alto,” he added. “I think developers have confidence that downtown Redwood City has a lot of the same attributes as Palo Alto, but tenants can get in less expensively.”
The other projects in the works are from Dostart Development Co., Harmony Capital LLC and Windy Hill Property Ventures.
Dostart has proposed a 136,500-square-foot building at 601 Marshall, kitty corner from the San Mateo County History Museum. Dostart is also working with KSH Architects.
Harmony Capital is eying a 35,000-square-foot building on a small parking lot behind the Fox Theater building fronting Winslow Street, at 815 Hamilton St. Kenneth Rodrigues & Partners is the architect. Eric Lochtefeld, the owner of the Fox Theater, is reportedly involved.
And Windy Hill has turned in plans to build a sixstory, 60,750 square foot office building at 30 California St. Arc Tec Inc. is the architect.
(I wasn’t immediately able to connect with Dostart, Lochtefeld or Windy Hill, but I’ll update the story if I hear back.)
Mike Cobb, a broker with Colliers International in Redwood City, said he thinks there’s plenty of demand to fill the office projects. The downtown is one of only a few places on the Peninsula that have a “baby bullet” Caltrain stop, he noted, which are among the more attractive locations for office tenants.
“Even with all the new development in the pipeline and that has already happened, I see downtown Redwood City as the most interesting location on the Peninsula,” Cobb said. “Crossing/900 notwithstanding, there is a ton of outdated product, but it’s one of the strongest markets in the region right now.”
Indeed, Colliers statistics show the submarket has a total vacancy rate of just 2.34 percent on a building base of about 717,000 square feet. And the existing availability is for very small spaces. (Those statistics don’t yet count Crossing/900, which only recently topped out.)
One problem: The city will have to decide how to proceed with the new office applications given that in aggregate they would exceed the amount of new space allowed under the downtown plan.
That plan allowed about 500,000 square feet of net new office space. About 100,000 square feet of office space has been demolished to make way for new housing, meaning that developers had about 600,000 square feet to work with. Crossing/900 ate up about 300,000 square feet of that.
Aknin said that the city would rely on the city council’s input in formulating a plan to deal with the wave of proposals, but it’s too early to say what that will look like.
“The plan itself says when you reach the cap, you go to council and discuss where you are in terms of status,” he said. “We’ll be doing that in September, deciding what is the allocation process as it stands.”
For now, all eyes are on Crossing/900, where observers expect a deal could be announced soon. That would be good for the marketplace, Lane Partners’ Murray said.
“Now assuming that lease gets done, it’s a proven test case which makes financing easier for folks,” he said.
Updated with information about Windy Hill Property Ventures new office application.
Nathan Donato-Weinstein covers commercial real estate and transportation for the Silicon Valley Business Journal.