San Jose Market Overview and Employment Lands Analysis January 20, 2016 prepared for: City of San Jose Four-Year General Plan Review TABLE OF CONTENTS TABLE OF CONTENTS ............................................................................................................... 2 TABLE OF FIGURES ................................................................................................................... 3 EXECUTIVE SUMMARY .............................................................................................................. 5 Growth Area and Subarea Geographies ....................................................................................................... 5 Recent Employment Trends.......................................................................................................................... 5 Office, R&D, and Industrial Markets ............................................................................................................ 10 Retail Market ............................................................................................................................................... 11 Supply of Vacant Employment Lands ......................................................................................................... 11 Market Potential of Urban Villages .............................................................................................................. 15 I. INTRODUCTION ........................................................................................................ 18 Defining Geographies for Analysis .............................................................................................................. 18 II. EMPLOYMENT TRENDS .......................................................................................... 22 Regional Employment Trends ..................................................................................................................... 22 San Jose Employment Trends .................................................................................................................... 23 Conclusions ................................................................................................................................................. 37 III. REAL ESTATE MARKET OVERVIEW: OFFICE, R&D, AND INDUSTRIAL ............ 38 Office and R&D ........................................................................................................................................... 38 Industrial and Warehouse ........................................................................................................................... 42 San Jose’s Major Employment Subareas ................................................................................................... 46 Conclusions ................................................................................................................................................. 56 IV. RETAIL MARKET OVERVIEW .................................................................................. 57 National and Regional Retail Trends .......................................................................................................... 57 Retail Market Overview ............................................................................................................................... 58 San Jose Retail Submarkets ....................................................................................................................... 60 Conclusions ................................................................................................................................................. 64 V. LAND DEMAND AND SUPPLY ANALYSIS ............................................................. 65 Supply of Vacant Employment Lands ......................................................................................................... 65 Demand for Employment Lands ................................................................................................................. 72 Comparing Supply and Demand ................................................................................................................. 79 VI. URBAN VILLAGES MARKET ASSESSMENT ......................................................... 81 Urban Villages Indices ................................................................................................................................ 81 Market Potential of Urban Villages .............................................................................................................. 84 APPENDIX A: EMPLOYMENT LANDS DEMAND METHODOLOGY ....................................... 92 APPENDIX B. MAJOR DEVELOPMENT PROJECTS ............................................................ 104 San Jose Market Overview and Employment Lands Analysis | January 20, 2016 2 TABLE OF FIGURES I. INTRODUCTION Figure I-1.General Plan Growth Areas ......................................................................................................................... 20 Figure I-2. San Jose Market Subareas ......................................................................................................................... 21 II. EMPLOYMENT TRENDS Figure II-1. Employment Trends: San Jose Metropolitan Statistical Area (MSA), 1990-2014 .................... 22 Figure II-2. Employment by Industry: San Jose Metropolitan Statistical Area (MSA), 2014 ...................... 23 Figure II-3. Employment in San Jose, 1st Quarter 2008 through 3rd Quarter 2014a .................................... 24 Figure II-4. Industry Cluster Definitions ....................................................................................................... 25 Figure II-5. Employment by Industry Cluster: City of San Jose, 2008, 2010, and 2014a ............................ 27 Figure II-6. Employment Change by Industry Cluster: City of San Jose, 2008-2014a ................................ 28 Figure II-7. San Jose Employment Composition by Subarea, 2014 ........................................................... 31 Figure II-8. Employment by Subarea and Growth Area Type ..................................................................... 32 Figure II-9. San Jose Employment Density: All Jobs, 2014 ........................................................................ 33 Figure II-10. San Jose Employment Density: Driving Industries, 2014 ...................................................... 34 Figure II-11. San Jose Employment Density: Business Support Industries, 2014 ..................................... 35 Figure II-12. San Jose Employment Density: Household Serving Industries, 2014 ................................... 36 III. REAL ESTATE MARKET OVERVIEW: OFFICE, R&D, AND INDUSTRIAL Figure III-1. Office and R&D Overview: Silicon Valley Cities, Second Quarter 2015 ................................. 39 Figure III-2. New Office/R&D Inventory Added, Santa Clara County and San Jose, 2006-2015 ............... 41 Figure III-3. Recently Completed, Under Construction, and Pending or Approved Office/R&D Projects in San Jose, 2009-2015a ................................................................................................................................. 41 Figure III-4. Industrial and Warehouse Overview: Silicon Valley Cities, Second Quarter 2015 ................. 43 Figure III-5. New Industrial/Warehouse Inventory Added, Santa Clara County and San Jose, 2006-2015 .................................................................................................................................................................... 45 Figure III-6. Recently Completed, Under Construction, and Pending or Approved Industrial/Warehouse Projects in San Jose, 2009-2015 ................................................................................................................ 45 Figure III-7. Total Inventory by Type: Golden Triangle/Alviso, 2nd Quarter 2015 ........................................ 46 Figure III-8. Recently Completed, Pending/Approved, and Under Construction Development in Northern San Jose, 2009- February 2015 ................................................................................................................. 47 Figure III-9. Total Inventory by Type: International Business Park, 2nd Quarter 2015 ................................ 49 Figure III-10. Total Inventory by Type: Central San Jose, 2nd Quarter 2015 .............................................. 50 Figure III-11. Total Inventory by Type: Southern and Eastern San Jose, 2nd Quarter 2015 ....................... 51 Figure III-12. Office and R&D Market Statistics by Subarea, Second Quarter of 2015 .............................. 53 Figure III-13. Industrial and Warehouse Market Statistics by Subarea, Second Quarter of 2015 .............. 54 Figure III-14. Office/R&D Development in San Jose, by Status and Subarea, 2009-February 2015 ......... 55 Figure III-15. Industrial/Warehouse Development in San Jose, by Status and Subarea, 2009-February 2015 .................................................................................................................................................................... 55 IV. RETAIL MARKET OVERVIEW Figure IV-1. Retail Overview, Silicon Valley and San Jose, 2nd Quarter 2015 ........................................... 58 Figure IV-2. Taxable Sales Per Household: San Jose and Santa Clara County, 2013 .............................. 59 Figure IV-3. Total Estimated Sales by Category: San Jose, 2008 and 2014