Houses are now planned for San Jose flea market site, offices are shelved

Houses will be built on a San Jose flea market site as a result of coronavirus-linked economic upheavals.

SAN JOSE — Houses will be built on a San Jose flea market site after coronavirus-linked economic upheavals prodded developers to ditch the concept of a huge tech office campus on the property, new city plans show.

At one point, 1.5 million to 2.3 million square feet of office space — enough to accommodate 7,500 to 11,500 workers — had been planned on the flea market site at 1590 Berryessa Road in San Jose. The office park proposal had been approved by San Jose city officials.

Instead of offices, a huge mixed-use housing development with well over 900 homes, along with retail, an urban market and plaza, and open spaces would be built on the property near the Berryessa BART station in San Jose under the new plans.

This means the project planners have ditched the concept of a vast office park geared towards big tech companies.

The reason for the dramatic shift: the current economic conditions in the wake of the business shutdowns ushered in by the coronavirus outbreak.

“The proposal will right-size the amount of commercial space to match market demand,” said Erik Schoennauer, a land-use consultant representing the site’s property owners, a group led by business executives Brian Bumb and Thomas Bumb.

The new proposal for the Market Park site will create a lively and vibrant urban scene in this section of San Jose’s Berryessa district, in Schoennauer’s view.

The site’s property owners have decided to employ a “builder’s remedy” approach to seek approval of the housing development. The builder’s remedy is a gambit that can dramatically streamline the approval process for a project, particularly in cities such as San Jose that have yet to win state certification of their housing elements. Housing elements are a blueprint for future residential development in a local jurisdiction.

“As currently approved, the Market Park development is proving infeasible to build,” Schoennauer stated in an email he sent to this news organization. “Therefore, the landowners have submitted a Builder’s Remedy application to the city to revise the commercial space and the housing types within the project.”

Here are the components of the housing under the new proposal:

— 451 townhome condominium units

— 399 apartments

— 90 condominiums

An estimated 20% of the proposed 940 residential units in the project will be deed-restricted for lower-income households that do not exceed 60% of the area median income.

One point of controversy arose from concerns raised by flea market vendors who were concerned they would be displaced without compensation or assistance as a result of the redevelopment of the site where they now operate.

“The proposal will preserve all of the previous commitments to Flea Market vendors,” Schoennauer said. He added that the commitments include “$5 million in financial support, a 5-acre urban plaza space to facilitate a public market, and minimum 1-year advance notification of closure of The Flea Market.”

Plus the proposal will continue to create an urban mixed-use environment at the Berryessa BART Station, with retail, housing, a 5-acre urban plaza and market, a neighborhood park, and creek trails, according to Schoennauer.

The current economic conditions brought on by an uneven return to the workplace as a result of the business shutdowns helped to doom plans for a big tech campus.

The project planners hope the development of 45,000 square feet of ground-floor retail space will help to create a vibrant mixed-use neighborhood next to the BART station.

“For the past six years, there has been no interest from office occupants of any type or category, not even from technology companies, in developing at this location,” Schoennauer said.

Tech companies instead have scaled back their demand for office space in numerous instances.

Even teams of brokers from Newmark and Borelli Investments, both veteran commercial real firms, failed to entice interest from tech companies or other corporate office space users, despite years of marketing efforts.

“In the wake of the COVID pandemic, the office market is substantially worse now,” Schoennauer said.

As a result, housing is a far more viable endeavor, project planners believe.

“The proposal will include housing types that are more likely to get financed and built in this market,” Schoennauer said.