The Mercury News
04/30/18

Hotel Tower Planned Near Santana Row Amid Google Effect
By George Avalos

https://www.mercurynews.com/2018/04/30/hotel-tower-planned-near-santana-row-amid-google-effect/

SAN JOSE — Santana Row is miles from the site of Google’s proposed transit-oriented community in downtown San Jose, yet a developer believes a high-rise hotel planned near the iconic shopping center could benefit from the search giant’s future mixed-use development.

The proposed hotel tower would rise a couple of blocks from the shops and restaurants in the eastern section of Santana Row, according to plans on file with San Jose city officials.

“The potential of a Google presence in downtown San Jose gives the investors a lot of good feelings about this hotel,” said Henry Cord, a land-use and planning consultant who is working with the developer on this property.

The hotel is envisioned as an 11-story building with 105 rooms, the planning documents show.

“We would have proximity to Santana Row, downtown San Jose, to the Google development, to the Adobe campus, to San Jose airport,” Cord said of the hotel.

Discussions are underway with major hotel chains for the lodging’s brand, Cord said.

“Silicon Valley hotel demand still continues to be very positive,” said Alan Reay, president of Atlas Hospitality Group, which tracks the California lodging market. “From an economic climate standpoint, the area’s hotel market is very strong.”

Average room rates in Santa Clara County as of February, the most recent month for which statistics are available, were $207.12, and 1.8 percent higher than a year ago, according to a CBRE Hotels Consulting report.

Some potential obstacles, however, stand in the way of developing new towers — hotels, residences and offices — in the Bay Area and elsewhere.

“Some developers are walking away from hotel projects because of construction costs,” Reay said. “Construction costs have skyrocketed due to more expensive lumber after all the hurricanes and fires. Subcontractors are bidding very high, raw materials are getting more expensive and labor costs are going through the roof.”

Still, the project leaders and Reay see plenty of potential upside for the proposed hotel.

Mountain View-based Google plans a transit-oriented community of offices, homes, retail and restaurants, a downtown San Jose development of 6 million to 8 million square feet where 15,000 to 20,000 of the search giant’s employees could eventually work.

“Google is a long-term development, but the potential for downtown San Jose and surrounding areas puts this region in a favorable position with investors and lenders for hotel projects,” Cord said.

And while Silicon Valley job growth has slowed from its white-hot peaks of very recent years, lenders and developers still like the prospects for the robust region.

“Silicon Valley does justify new construction because it’s Silicon Valley,” Reay said. “Being so close to Santana Row makes this a superb location for a hotel. Santana Row is the equivalent of Rodeo Drive. You could have several major brands fighting to be on a hotel at that location.”