Santana Row developer eyes 2020 milestones as it restarts construction on large spec office project

Thu, May 14 2020

Mathew Niksa – Silicon Valley Business Journal

One of San Jose’s largest speculative office developments is back in action.

Construction on One Santana West, Federal Realty Investment Trust’s large Class A office project located directly across from its Santana Row shopping center in West San Jose, resumed on Wednesday following a nearly two-month pause under the county’s earlier shelter-in-place restrictions.

With South Bay contractors now allowed to resume construction as long as they follow social distancing and other safety protocols, builder Devcon Construction brought its crews back on site this week at One Santana West to build the 375,000-square-foot project, which represents the first phase of Federal Realty’s 750,000-square-foot Santana West office campus development. All told, the development has the potential to expand to up to 1 million square feet and will offer a campus environment in an urban setting.

Seth Bland, senior vice president of West Coast development at Federal Realty, told the Business Journal that roughly 100 people were on site Wednesday. While that number was less than the 150 workers Bland estimates were on site when construction was “really moving” before the March shelter-in-place order took effect, he said he doesn’t think it will take long for construction to return to 100 percent efficiency.

One Santana West is expected to be available for first tenant build-outs in July 2021, two years after the project broke ground in July 2019. The eight-story building will have two levels of underground parking with 350 spaces, plus an adjacent five-story parking garage with 1,400 spaces.

Below are excerpts of the Business Journal’s in-person interview with Bland on Wednesday, which was conducted at the site of One Santana West — at a six-foot distance in observance of social distancing guidelines, of course. This conversation has been edited for length and clarity.

How much of One Santana West will be completed by year’s end?

The parking structure will be largely complete by then. The building will be “topped out” in November, and we will have begun “skinning” the building by then, putting the exterior on. So you’ll see what are called the GFRC (glass fiber reinforced concrete) panels, the glass and glazing coming in on the lower floors by then.

It will very much begin to look like a real building in terms of taking shape by the end of this year.

What’s the interest in One Santana West been like from a leasing standpoint?

Up until the March shelter-in-place order, we were talking to several tenants. It’s not that we’re not talking to them currently, but the conversation has become a little more muted for the time being.

Every tenant, no surprise, is looking at the future a little differently today than two months ago. But we have eternal optimism at the end of the day, we really do. We think that Santana Row has shown that it’s among the most resilient of places, that it as a mixed-use amenity is indeed a place where people want to be, and we have every confidence that that will continue to be the case.

(Note: Executive-level brokers Tracey Solari, Todd Shaffer and Randy Gabrielson of Newmark Knight Frank’s San Jose and Palo Alto offices are marketing One Santana West for pre-lease).

When I spoke with Jan Sweetnam, Western Region chief operating officer at Federal Realty, in December 2019, he said One Santana West would need to be leased before construction on Two Santana West, an eight-story office building project, begins. Is that still the plan?

Absolutely, that will still be the case. We’re optimistic, but we’re not foolhardy.

Another project I discussed with Jan was Santana Row Lot 12, a planned five-and-a-half-story building with 258 residential units at the southeast corner of Santana Row. One of Santana Row’s neighbors, the Villas at Santana Park Homeowners Association, filed a California Environmental Quality Act (CEQA) lawsuit against the project.

What’s the status of Lot 12 now?

We are continuing to work with San Jose on pursuing the building permits, and, in fact, we will resubmit plan check comments on May 18 to the city. That track continues.

Not quite two weeks ago, we were, by Zoom call, in front of the Sixth District Court of Appeal on that CEQA lawsuit. The Sixth District Court of Appeal issued their ruling in our favor, the city of San Jose’s favor, shortly thereafter. It’s my belief that at the moment, the CEQA process is behind us, but there may be a period of time where something else could happen.

But at least the court of appeal is now the second appeals court to have ruled in favor of the city of San Jose and of Santana Row in terms of CEQA compliance [for the Lot 12 project], which does not surprise us.