San Jose property managers and investors were in a frenzy when Google announced its ambitious plans to build a 6 to 8 million square foot office and R&D complex near Diridon Station. The scale of development far surpasses anything San Jose has seen before.
But as it turns out, it’s not just investors or San Jose property management companies who are excited by the news. Since Google announced its plans last month, a number of other companies have announced their intention to relocate to or expand their presence in San Jose.
Just last week, Adobe Systems joined the fray.
On Thursday, Adobe announced it was planning to buy a property near its main offices in order to expand its already massive, 3-building headquarters in downtown San Jose. By adding a fourth tower, Adobe would be able to more than double its downtown workforce from 2,500 employees to an estimated 5,500.
“It’s an exciting time for Adobe, and we continue to thrive and grow as a company,”said Jonathan Francom, Adobe’s vice president of employee and workplace solutions. “We are doubling down on San Jose with [these expansion plans].”
Adobe will be purchasing the parcel, located at 333 W. San Fernando Street, from Wolff Urban Development and JP DiNapoli Cos. The purchase price has not yet been disclosed, but real estate experts suspect it will be steep. Earlier this month, Boston-based AEW Capital Management purchased a downtown San Jose office building for more than $80 million, a record $509 price per square foot for the area—a number that shattered the previous record by about $90 per square foot.
Francom acknowledges how hot the San Jose market is, but says it’s worth it.
“As we know, land in the Valley is at a premium, but there’s a reason,” he says. “It’s a great place for us to continue to invest in our growing population in a great place that has a deep talent pool that we can leverage for our future needs at Adobe.”
In many ways, Adobe is considered a pioneer among downtown San Jose office tenants. Adobe was one of the first major tech companies to buy real estate in San Jose when it built the first portion of its 900,000 square foot headquarters at 345 Park Ave. more than two decades ago. Their latest expansion plans just reaffirm the company’s commitment to San Jose.
The news has San Jose property management companies, landlords and investors buzzing. Google’s expansion plans are exciting, to be sure, but its San Jose mega-campus could take years to construct. The parcel that Adobe plans to buy has already gone through the entitlement process; an 18-story mixed-use tower has already been approved by the City. This should allow Adobe to break ground much faster than Google, meaning more jobs in downtown San Jose on an even shorter timeline.
“We were thrilled to hear about Adobe’s expansion plans,” says Mynd co-founder Colin Wiel. “Although Adobe’s plans to purchase the parcel at 333 W. San Fernando have been in the works since early this year, the announcement last week is simply further validation of the San Jose office market. And for San Jose property managers, landlords and investors – further validation of the local rental market. Just as investors are willing to pay a premium for office space, we’re seeing more people pay a premium for San Jose homes and rental properties.”
Just how far prices will climb remains to be seen.
“The growth of downtown San Jose has some investors thinking the sky’s the limit,” says Wiel. Markets always ebb and flow, but if these corporate expansion plans come to fruition, demand for rental housing will continue to grow for the foreseeable future.”