Construction halts on big San Jose tech campus amid wobbly office market

SAN JOSE, Calif. — Construction on a massive tech campus in downtown San Jose has been halted amid a weak Bay Area office sector, dealing a new blow to the city’s already shaky urban core.

Boston Properties has put its Platform 16 project in downtown San Jose on hold, according to the company’s CEO during a conference call this week.

“Unfortunately, market conditions in Silicon Valley, including San Jose, have deteriorated significantly,” said Owen Thomas, CEO of Boston Properties, during a conference call to discuss the company’s quarterly financial results.

The move could be a setback for San Jose’s downtown aspirations, as civic leaders work to revitalize an urban core hollowed out by a once-in-a-generation pandemic. It comes after Google announced in February that it was reevaluating the timeline for its massive Downtown West project.

“Everyone needs to face reality and say, in the 21st Century economy in Silicon Valley, where people don’t go to the office anymore, what are we going to do with these communities we’ve been building for the last 100 years,” said Kelly Snider, an urban and regional planning professor at San Jose State University.

If completed, the Platform 16 campus at 440 West Julian Street between Autumn Parkway and North Autumn Street would cover 1.1 million square feet and include three buildings.

The project is located near the Diridon train station and SAP Center, where Google has stated that it intends to develop a mass of office buildings, homes, shops, restaurants, entertainment hubs, cultural loops, open spaces, and hotel facilities.

Despite rising office vacancy rates and a surge in sublease space placed on the market by tech companies, officials in San Jose said they are ready to assist Boston Properties in “re-launching construction when the time is right.”

“The project’s proximity to Diridon Station and the upcoming electrification of Caltrain, housing, SAP Center, San Jose Airport, higher education institutions, and the Downtown West Project keeps this a strong and attractive project for future tenants,” said Nanci Klein, director of Economic Development and Cultural Affairs for San Jose.

According to separate reports from commercial real estate firms Cushman & Wakefield and CBRE, office vacancy levels reached all-time highs in four key Bay Area markets during the April-June second quarter of 2023: 31.8% in downtown San Francisco, 35.7% in downtown Oakland, 29.9% in downtown San Jose, and 21.6% in Silicon Valley.

“Vacancy rates are some of the highest that we have seen in a couple of decades, with no end in sight,” said David Taxin, a partner at commercial real estate firm Meacham Oppenheimer.

The Platform 16 halt is the second time construction on what is expected to be a striking office complex has been halted after it began. Boston Properties broke ground on the complex in March 2020, with much fanfare and a ceremony attended by San Jose’s mayor at the time, Sam Liccardo, as well as a slew of other dignitaries and top officials.

Days later, the coronavirus appeared on the scene and quickly wreaked havoc on the global economy, including widespread business shutdowns to combat the spread of the deadly bug. Work on Platform 16 and numerous other construction projects came to a halt.

Boston Properties resumed construction on Platform 16 with the first phase of the project, a 390,000-square-foot office building, in February 2022, after a nearly two-year suspension of work on the project that would rise near the banks of the Guadalupe River. The foundation for all three buildings, as well as a parking garage, were also included in the first phase.

Boston Properties has decided to halt construction once more, approximately 18 months later.

Platform 16’s halt opens up a large window of opportunity for a Bay Area development firm that has completed a downtown San Jose office tower. The 200 Park office tower, located at the intersection of Park Avenue and Almaden Boulevard, is a striking 965,300-square-foot structure that can immediately offer tenants large chunks of office space. 200 Park was developed and is owned by Jay Paul Co., a savvy and experienced real estate firm.

“Flexible floor plates, outdoor terraces, and carved light canyons are just some of what makes 200 Park state-of-the-art and memorable,” the company says in a blog post about the project. Despite the latest setback for Platform 16, Boston Properties executives remain confident that the tech campus will thrive when the Bay Area’s office market improves.

“While disappointing, we will have a project that can be delivered to users in under two years, which is 12 to 14 months faster than a ground-up development,” Thomas told Wall Street analysts.