SAN JOSE (CBS SF) — A new example of what might be called the “Google effect” is leading real estate speculators to drop big money on properties in downtown San Jose.
East coast investors just bought an $80 million office building near the Diridon Station, not far from where Google is set to build a huge new campus.
The building sits at the crossroads of Almaden and San Carlos streets.
But the sale of 303 Almaden also crosses a price line never seen in the downtown area.
“What’s significant about 303 Almaden is that it broke the $500 per square foot mark,” said Mark Ritchie of South Bay real estate agency Ritchie Commercial.
Commercial real estate expert Ritchie said it shattered the previous record by about $90 per square foot.
The deal may have already been in the works before Google announced plans to build an 8 million square foot transit and tech village near Diridon Station.
But it comes amid speculation of a “Google effect” that would be transformative for San Jose.
“I don’t think anyone yet has a handle on how significant that will be, said Ritchie. Because Google is effectively coming into downtown and building as much space as exists in the entire rest of downtown San Jose.”
Just blocks away, tech company Zoom Video Communications is just glad it just finalized a leasing deal for two more floors just blocks from 303 Almaden and the Google project.
“Timing is everything right? So I’m glad we locked up some of the leasing already, especially with this new news,” said Zoom Video Communications spokesperson Greg Holmes.
The teleconferencing software company is on its own growth spurt, hiring 200 people in the last six months.
For Zoom, San Jose has been a bargain.
But as the downtown office market heats up, new startups may not have a place to grow.
“If you look around a lot of the companies are in their second stage as a startup, so it might make it more challenging for newer companies to get started here with the new pricing,” admitted Holmes.
One group that’s already benefitting are the people building it all. From high-rise condos to ground-floor sandwich shops.
Construction workers are building three new small businesses that will cater to the incoming tech crowd.
“We saw through the recession it was very slow to moderate. And now it’s just really tremendous,” said project manager Anthony Alamillo. “It’s booming.”
It will take years for the Google effect to fully take shape, but right now, it seems you can count on two things happening: high demand and high prices for just about anything in downtown San Jose.