Mission Rock, Santana Row Draw Commercial Tenants

As San Francisco and San Jose have struggled to attract commercial and retail tenants to their downtowns, mixed-use developments removed from their cities’ cores have been working hard to capture tenants demanding safer, newer, more amenitized offerings.

“If you can essentially fall out of the building and hit a restaurant, you’re probably on the right track,” said Erik Hallgrimson, vice chairman at Cushman & Wakefield in Silicon Valley, especially since companies are competing for talent with the likes of Apple and Google, which provide plentiful onsite amenities for employees.

At Mission Rock in San Francisco, developed by Tishman Speyer and the San Francisco Giants, and Santana Row in San Jose, developed by Federal Realty, the ability to control the ground floor with highly curated retail offerings, private security — and in Santana Row’s case, even privately owned streets — and programmed parks and other open spaces has been key to their commercial and retail successes in a down market.

“We’ve spent really an outsized amount of time on those elements that the public can engage with,” said Maggie Kadin, managing director at Tishman Speyer.

That means getting creative with profit participation models and “hefty investments” in build-outs to sign the retail names — like Arsicault, Flour and Water, Que Fico, Blue Bottle, Lux Fit and Ike’s Sandwiches — that office tenants want to see, she said.

“We were able to be a little bit more picky because we were willing to structure pretty creative deals,” Kadin said. “We really want our retailers to be our partners and we want them to be successful. We don’t want to overburden them.”

The same highly selective philosophy holds true at Santana Row in West San Jose, where Federal has been building up its retail, hospitality and residential roster for the last 20 years, which has enabled it to bring in big names like PwC to fill up its newest office building — One Santana West.

“The retail feeds the residential, that feeds the office, that feeds the retail and it becomes this ecosystem that everything benefits from the other uses,” said Jeff Kreshek, COO at Federal Realty. “There was certainly some risk, but there was a belief that we understood what we were doing, and we understood how to create something very different.”

Originally envisioned as a single-tenant building when the office market was “on fire” pre-pandemic, Federal had to make some shifts in its thinking on One Santana West, which sits on land leased for 99 years from the Winchester Mystery House next door, according to Scot Vallee, Federal’s SVP of regional development.

The company subdivided the 375,000-square-foot building to draw in office tenants looking for less space, though PwC did take three full floors with several large, private balconies when it signed one of the biggest South Bay leases of last year. Vallee anticipates it will be fully leased by this summer.

“I think they felt they were on an island and here they’re part of a community,” Vallee said of how the development was able to draw the accounting giant, which he said has already started having meetings at One Santana West even though it won’t leave its downtown digs for months.

“They’re itching to get in,” he said.