Breaking ground on a thriving downtown
Developer says transit will have a greater impact on future development in San Jose than the Google Village
SAN JOSE >> Case Swenson, a veteran real estate executive who heads the Swenson development company, embraces the high-octane speed of big-time racing events and the meticulous precision demanded by a round of golf with the same passion he brings to the development business.
Swenson is developing a 260-room residential high rise with 1,039 beds, geared toward students, a block from San Jose State University. Named The Graduate, the project is Swenson’s joint venture with Los Angeles-based Amcal Equities, a long-time residential developer. They broke ground last fall, and the project is expected to be completed in 2020.
Swenson also has expressed a vision for transforming the area around the Guadalupe River into a worldclass recreational area that could awaken new interest in San Jose.
Amid a blossoming of potential for downtown San Jose, this news organization recently sat down with Swenson to gauge his views about the future of the city’s urban heart.
Q
What’s your perception about how downtown San Jose is doing right now compared to where it was five years ago?
A
Five years ago, we were just coming out of the Great Recession. Clearly the downtown has covered a lot of ground since then. We have probably had 2,000 residential units built downtown since then. There are probably another 1,500 in the pipeline. We are hoping to see more of that.
Q
What has caused this increased activity?
A
Office and residential rents are a little lower here in San Jose. Rents in places like Cupertino, Sunnyvale, Palo Alto and Mountain View have gotten so expensive due to a lack of supply. For whatever reason, those cities have chosen not to continue with housing development as aggressively as they have with office development.
Q
How important is the proposed Google village and development to what you are trying to accomplish in downtown San Jose with The Graduate residential tower and other projects?
A
We saw Cisco 15 years ago try to move into Coyote Valley, which did not happen. I believe it will happen downtown with Google, but it’s still not a lock. If Google does come, there clearly will be many enterprise companies that will follow.
Q
How much of an effect would Google have?
A
San Jose is the technology capital of Silicon Valley, but for some reason, Google chooses to be based 15 miles north of here. But Google and BART coming to downtown would be a game changer.
Q
What are the key uncertainties with Google?
A
The question is — Are they preserving this property for the future, or is Google going to aggressively develop?
Q
What is the next big thing that has to happen for downtown San Jose to take a major step ahead?
A
It would need to be an enterprise company. Amazon has just moved into the WeWork space. That was a lot bigger step than just 20,000 or 40,000 square feet of offices. The fact they are here, and people want to work there, is clearly going to spur other enterprise companies to come into downtown San Jose. I thought Adobe was going to do it for us. Adobe was the pioneer. We are so thankful Adobe is here. But it’s going to take one or two more tech companies to show that San Jose can be the technology capital of the world and that downtown can be the focus of that.
Q
Would more tech companies in San Jose, including downtown, help with the commute?
A
People who work at Apple every day, 55 percent of them come from the south, places like San Jose. So more tech companies downtown and in San Jose would make it easier for people to get to work. There are really not enough people working downtown to spur all the retail and restaurants we want here. You really need the foot traffic to make all the retail work, all the housing, the medical, the restaurants; every single industry needs to be a part of the infrastructure that is already here downtown.
Q
You recently expressed a grand vision for the Guadalupe River and what it could mean for the downtown area. How could the river area evolve in your view?
A
The Guadalupe River is very underutilized, whether it would be for parks or some type of industry. A portion of those open spaces should be developed to a world-class level, parks, soccer fields, baseball, skateboard parks, kayaking, everything you could imagine in a recreational area.
Q
What was the thought process that brought forward that Guadalupe River proposal?
A
Really, the idea was to catch people’s attention about the type of development that could be done at the Guadalupe River. This could create a place for people to go when they come to the convention center. They could go to the river walk in downtown San Jose. Many towns have river walks and they are very successful. People like to be around the water. That was what sparked the idea.
Q
How much potential would a river walk have for San Jose?
A
You could have an upgraded Guadalupe River generating $50 million a year for the city, and you could use that money to hire police officers, people to maintain the river park, even take that money to help house the homeless. Unfortunately, you have to sacrifice a bit of the natural surroundings. But you have to look at the big picture. Clearly, there is gold at the end of that rainbow.
Q
Even before Google, do you see the start of a vibrant downtown San Jose?
A
BART is the key for downtown San Jose. BART is more of a key even than Google. To be able to live anywhere off a BART line and get to downtown San Jose without your car would be huge. And you could combine that with Uber or Lyft. BART is what will allow all of that to happen.
Q
A
Downtown San Jose will be where tech companies, enterprise companies will want to be. Having BART get here by 2023 will change the market so much; office rents will change so much that it will make construction viable.
Q
How serious is the problem with rising construction costs for both materials and labor?
A
It’s so serious that one of my vice presidents and I recently burst out laughing at one of the bids we got from one of our mechanical contractors. This is no disrespect to the mechanical industry. But a lot of those companies are running their crews seven days a week, 10 hours a day. We have iron workers on our Graduate job that have worked for the last 22 days straight, not one day off. Being an iron worker is one of the toughest jobs in construction.
Q
How much have construction costs risen?
A
It’s been about a 30 percent increase since 2013.
Q
Have you ever seen increases of this type during your decades in the business?
A
No. It’s largely due to the labor shortage, but it’s also because after the banks loosened up after the recession, that allowed financing for a lot of projects that had been laying in wait.
Q
Is it also materials costs?
A
Absolutely. Steel costs, especially, have been on a tear. Lumber is going up because of supply and demand. So is drywall. There is just so much demand for these raw materials right now.
Q
With the rising construction costs, how did a project like The Graduate get out of the ground?
A
The most important part of that is it’s a different type of project. It’s student housing, with four bedrooms per unit, all within 800 square feet. So that changes the financial model by paying per bedroom as opposed to per unit.
Q
Is that the type of flexibility that you apply to leading the Swenson company?
A
If housing doesn’t work at a location, what about office, what about medical, what about assisted living? I like to go into a different industry that isn’t as saturated. Once you have the institutions come in — the insurance companies, big finance groups, REITs (real estate investment trusts) — and they are competing with the local developers, their money is less expensive than ours. They can add amenities, they can build a better product in the same area.
Q
What will bring this construction crisis to an end?
A
Less demand to construct buildings will bring about a change. That’s what’s going to move the needle.
Q
Even with the housing shortage, even with the traffic mess, will tech companies continue to come to Silicon Valley, start here and expand here?
A
Silicon Valley is the technology capital of the world. There have been too many bright ideas, there are too many great engineers. So many technology marvels that have happened here, started here. There are so many resources to be able to work with other enterprise companies to be able to fulfill the ideas of the startups here.
Q
What was it like to take over the Swenson company, to start at the Swenson company?
A
First, it was great to work with my dad (Barry Swenson). I was thankful to work with the team he had assembled. The knowledge that they all have is something I value very much. They had a 20-year head start on me.
Q
How old were you for your first construction job?
A
I was nine years old. That was hard work. I was a laborer and I wanted to be playing with my friends. On the other hand, making minimum wage at nine years of age was great. No bills to pay.
Q
When did you know that construction and development was what you wanted to do?
A
Junior year in college. When I got out of college, I had a janitorial service that I built into a real company. It was great to watch something like that grow.
Q
What do you like the most about your job?
A
Breaking ground. Breaking ground is like a miracle, it truly is. When you break ground, all the frustrations about this job, all the things I don’t like about it, seem much better.