An apartment building boom is breaking records in the South Bay as developers race to complete projects for the tens of thousands of new hires in Silicon Valley's expanding economy.
The surge in construction will add 4,000 new apartments this year to San Jose alone, a record, and eventually bring an estimated 9,000 units to the South Bay, according to city officials and apartment industry analysts.
The demand for apartments close to work should continue "as long as the job market continues to expand and people are moving into that area because of all the great things that are happening there," said Peter Solar, development director for Equity Residential, which has a project in North San Jose.
While the East Bay hasn't seen a similar explosion in apartment building because of lower job growth, more than 1,000 apartment units are expected to be built there through 2014, according to commercial real estate brokerage Marcus & Millichap. But demand there is increasing as the South Bay's high rents send some apartment hunters to the East Bay, where rent is more affordable, the company said in a recent report.
In Silicon Valley, builders are responding to a wave of hiring that has added more than 30,000 jobs in the past 12 months, many of them in the well-paid professional, technical or computing areas. In addition, the tight housing market means many people who want to buy can't find homes and end up in apartments.
Amid a vast
On one corner of San Jose's North First Street, Equity Residential is speeding completion of a 444-unit complex, using a modular construction system in which completed apartments are hoisted into place with giant cranes. That will be followed by a second phase of 554 units.
Not far away, Irvine Corp. is building the 1,750-unit Crescent Village, where a one-bedroom rents for about $2,200 a month. It is scheduled for completion next summer. About 400 people have already moved into a recently completed section.
And across the street from the campus of semiconductor design company Cadence, the Palo Alto-based Essex Property Trust is building the 769-unit Epic Apartments.
The projects under way in San Jose are mainly luxury units designed for relatively young, upwardly mobile tech workers able to pay a premium, along with a smaller number of affordable housing units around the city for people qualifying as low-income, according to the city planner's office. Many of the upscale complexes will command monthly rents of $2,000 or more.
The construction surge follows a five-year slump that a San Jose city planning report describes as "roughly the lowest levels of development activity ever witnessed in San Jose."
In North San Jose, longtime residents are viewing the building boom with mixed feelings.
"As a resident, we're really concerned about what it's going to do to traffic in our area," said Mike Bertram, spokesman for the River Oaks Neighborhood Association. On the plus side, Irvine Corp. developed a park he believes is one of the best in the city.
One new resident of Crescent Village, who was recently walking her dog in the park, said she's happy.
"I love it, it's so green," said Claudia Garcia. She said she and her husband, who works for a software company, arrived recently from Argentina and just moved into a Crescent Village apartment.
According to applications and permits on file with city planning departments:
"With the increase in demand for rental housing because of the economy, there's been an increased drive to build," said Lindsay Hagan, a planner with Mountain View's Community Development Department.
Will the race to meet demand lead to overbuilding and the bursting of a mini-bubble?
"From the pure mathematics of supply and demand, I don't think we're headed for any kind of a disaster," said Hessam Nadji, managing director for research at Marcus & Millichap.
"We're at a time when the consumer is still preferring to rent versus buy homes. We are adding jobs in Silicon Valley, one of the fastest-growing job markets in the country," he said.
Contact Pete Carey at 408-920-5419.