San Jose’s San Pedro Square Leasing
Submitted April 26, 2010, 6:49 PM
Long-time Silicon Valley developer Barry Swenson, his son-in-law Martin Menne and San Jose restaurateur Stephen Borkenhagen plan an opening Aug. 1 for their San Pedro Square venture. The three-building development, which bookends one historic property and is across the street from a second, is to have 13,000 square feet of rentable retail space, approximately 50 vendors and a 25,000 square-foot public plaza.
Borkenhagen, who is managing the leasing and will oversee the development’s operation once it is open, attributed tenant interest to its “low barriers to entry.”
“There is no infrastructure expense for the tenants, so for them, it’s a good start,” Borkenhagen said. “It’s also a huge advantage to us because they are creative and one-of-a-kind tenants.”
Rents are being signed in the $4 a square foot a month range with tenants also taking on another $1.50 a square foot for common-area and other expenses, he said. While the numbers are high relative to what other retail landlords are collecting downtown, they are still affordable because tenant spaces are so small. Most tenants are expected to be open seven days a week from 11 a.m. to 7 p.m. though longer hours are possible. On Fridays and Saturdays, San Pedro Street will be closed for a farmer’s market.
Four anchors including a baker, a butcher and a fish monger, will occupy about 1,000 square feet each; the remaining square footage is parceled out in increments as low as 100 square feet each for produce and flower sellers, food vendors and even a single-chair barbershop, Borkenhagen said.
At the same time, lease terms can be short so that on the back end, for tenants who don’t work out, it is easy for them to leave, he said. That said, controlling tenant behavior and ensuring consistent operations across so many people mean leases are 50 pages long, he said.
Borkenhagen and Menne spoke April 27 at an informal gathering in San Pedro Square to feature the development. The event was sponsored by the Urban Land Institute. Those in attendance included other developers and local real estate brokers.
“We have been overwhelmed by the tenant activity and interest,” Menne said. “We expect to bring hundreds of thousands of people to the area.”
Menne is president of San Jose’s MCM Diversified, a commercial property owner and manager.
The development, on the north end of downtown’s San Pedro Square district, capitalizes on the historic charm of the area. A central building in the public market is the El Dorado Bakery, a 50-year-old unreinforced brick structure now being stabilized and upgraded to accommodate about 20 tenants.
The bakery building is adjacent to the Peralta Adobe, San Jose’s oldest surviving structure and the only surviving adobe, according to Silicon Valley History Online, a collaboration that includes Santa Clara and San Jose State universities. The property, a diminutive, low-slung, cream-colored building with sizable grounds, is managed by History San Jose, a local nonprofit, and will continue to be. The Peralta Adobe is a perennial field-trip destination for Silicon Valley school children, a practice that is expected to continue, Borkenhagen said. The historic Fallon House, built in the mid-1800s by former San Jose Mayor Thomas Fallon, is across St. John Street.
The San Jose Redevelopment Agency awarded a $2.5 million grant to aid the development and supplied a $2.5 million loan, Menne said.
The development marks the latest investments in downtown by business people who have been long-time believers and supporters. Barry Swenson has invested in multiple downtown developments across property types. He built downtown’s City Heights, a pioneering high-rise condo project with 120 units that is now in final sales. The building is a stone’s throw from the public-market site. Swenson is also pursuing other development in the same area. Borkenhagen’s family opened downtown San Jose’s Eulipia Restaurant & Bar in 1977.
Borkenhagen described the new public market as a “game changer” for downtown, which is obviously struggling. Restaurants that survived the depths of the dot-com bust in the early years of the decade have fallen to this latest onslaught.
Despite such a backdrop, he is optimistic: “We know it is a big vision and a big goal, but we think we can pull it off,” he said.
