Jay Paul calls timeout on 3.4M sf tech office project in San Jose

Jay Paul Company has tapped the brakes on a 3.4 million-square-foot tech office, retail and restaurant complex in Downtown San Jose.

SJ Cityview, an affiliate of the San Francisco-based developer, has requested a five-year extension of its permit to develop a block-size site bounded by Almaden Boulevard, West San Fernando Street, South Market Street and Park Avenue, the San Jose Mercury News reported.

Jay Paul’s development permit is slated to expire in June 2025; a five-year extension would allow the megaproject to be built before June 2030.

The city’s Planning Department is expected to rule on the extension in the next two months.

In 2018, the Jay Paul affiliate paid $283.5 million in cash for nearly all of CityView Plaza, a 580,000-square-foot complex of offices, shops and restaurants in Downtown.

The developer then bought two adjacent properties with plans to redevelop CityView Plaza with three 19-story, interconnected office towers containing 3.4 million square feet of offices, shops and restaurants.

A new CityView would also include 85,000 square feet of rooftop terraces and an 80,000-square-foot gym.

But with higher interest rates and the office availability rate in Silicon Valley now at 20.8 percent, according to CBRE, Jay Paul sought to delay construction, given a less-than-ideal office market.

“Current financial markets and a reduced demand for office leasing have made the short-term leasing feasibility of this project untenable within the currently defined timeline,” Jay Paul said in the filing with the city planners.

Last year, Jay Paul completed a 19-story, 971,000-square-foot office tower at 200 Park Avenue, across the street from the CityView Plaza development site.

A delay for CityView Plaza appears to be a good move, said Phil Mahoney, a commercial broker for Newmark trying to land one or more tenants for the 200 Park tower.

“It makes sense for Jay (Paul) to hold off on CityView,” Mahoney of Newmark’s San Jose office, told the Mercury News. “There’s no point to build more office space, given the demand right now.”

Jay Paul Company, led by billionaire Jay Paul, has developed 12 million square feet of office space in Silicon Valley, leasing offices to such companies as Hewlett-Packard, Amazon.com and Apple, according to Forbes. The developer also owns properties in Santa Cruz, San Diego and Austin, Texas.

— Dana Bartholomew

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