Although this city in the heart of Silicon Valley is hardly a stranger to new construction, the completion of a new apartment complex is a notable event in this region, where the explosive rate of job creation is outpacing the rate of home building by nearly two to one.
The 120-unit Park Place South, the third and final phase of a mixed-use project that also includes office and retail space, is also an example of the ingenuity that developers and city officials must use to build new apartment units where both the high cost of land and a scarcity of sites are constraints on home building.
Developed by Prometheus Real Estate Group Inc. of Redwood City, Calif., Park Place South received its first resident in June and is 75 percent leased in a region where apartment rents are high and vacancies are very low.
Located at the center of Mountain View’s small downtown, the Park Place project stands on the 8-acre site of a former high school.
Starting 10 years ago, Prometheus built an earlier phase of 370 apartment units, followed a few years later by 112,000 square feet of office space and 13,000 square feet of retail storefronts.
All five residential buildings are built atop a concrete podium, which covers an 856-space parking garage. The garage is not visible to pedestrians, however, who stroll among small individual buildings and landscaping.
A number of the newer units have front steps, which the developers say were modeled after those of New York brownstones.
Located 35 miles south of San Francisco, Mountain View (population 75,000) is one of a cluster of suburban communities, mostly in Santa Clara County, that have become known collectively as Silicon Valley. (The valley comprises Santa Clara County and parts of Alameda and San Mateo Counties.)
Famed for the many computer, software and Internet-related companies in the region, these quiet bedroom communities in recent years have become increasingly exclusive domains of high-tech executives, with some of the highest apartment rents in the nation.
In Mountain View, the average rent on a one-bedroom, one-bath apartment was $1,645 at the end of June, which was 28 percent higher than the level a year earlier, according to Marcus & Millichap, a real estate brokerage based in Palo Alto, Calif. Rent on a two-bedroom, one-bath apartment averaged $2,150, a 24.4 percent increase.
With a vacancy rate of only 0.4 percent, the apartment market is almost fully occupied.
The run-up in prices reflects both the rapid rate of job creation in the region and the comparatively slow rate of home building.
In the last five years, Silicon Valley companies have created 220,000 new jobs, while home builders added only 28,000 homes, condominiums and apartments to the area, according to the Association of Bay Area Governments, a regional planning agency representing nine counties in the San Francisco Bay area.
In the next 10 years, Silicon Valley businesses are expected to create another 183,000 jobs. Although the Bay Area Council believes that 110,000 new housing units are needed to house those workers and their families, the organization expects only 70,000 units to be built.
That shortfall has given many Silicon Valley employees, especially engineers and other highly skilled workers recruited by the region’s high-tech industry, a dilemma: either pay inflated housing prices in local cities or endure long commutes from faraway cities. (Some workers are commuting from as far as 100 miles away and are spending up to 3 hours in commutes.)
In response to the regional shortfall in housing production, Mountain View officials “have been looking at our general plan to see what the city can do to encourage new housing,” said Ellis Berns, the city’s economic development manager.
In one effort, the city collaborated with builders to create a neighborhood of small-lot, single-family homes along a light-rail route formerly shunned by builders.
To promote apartment construction, the city has allowed developers to build at a density more than 50 percent higher than normally permitted under zoning.
The Park Place project is built at 77 units per acre, on a site zoned for a maximum of 50 units per acre, making the four-story complex the densest residential development in Mountain View.
The extra density is necessary to make apartment construction attractive to investors in a city where land carries a high price and is generally sold to office developers.
“Zoning on residential land is generally low-density and won’t pencil out” without the added units, said John Moss, vice president of development at Prometheus.
The rents at Park Place South are higher than average, ranging from $2,545 for a one-bedroom, one-bath with 745 square feet, to $4,720 for a three-bedroom, two-bath unit with 1,461 square feet.
The developers say the prices partly reflect the quality of construction at Park Place, which has been built to condominium standards.
Tenants in the complex are a microcosm of the Silicon Valley work force, including a number of European immigrants who have been recruited by local companies for their engineering skills.
Some renters are single people who rent two-bedroom units, sleeping in one bedroom and using the other as an office for telecommuting. One pair of roommates, who are also business partners, have rented a three-bedroom unit, with a bedroom for each and a third room for business.
Among the tenants of the new complex is John van Suchtelen, who recently relocated from Toronto to take a job at Netscape overseeing e-commerce activities on the company’s Netcenter site.
“I was very lucky to find the place, and it was very good timing, because the project was just being completed,” he said.
Van Suchtelen acknowledged that he was taken aback by the rents at first.
“The initial sticker shock really freaked me out,” he said.
After he had researched housing alternatives, however, the one-bedroom, one-bath unit at Park Place, for which he pays $2,550 monthly, “was not such a bad idea,” in part because the apartment was close to Netscape’s offices in Mountain View.
“If I was paying that much, I might as well be close to work, so I would not be paying for the commute as well,” Van Suchtelen said.
Beyond providing the city with sorely needed rental housing, Park Place is also a keystone in the city’s tiny downtown.
Standing directly south of City Hall and the Performing Arts Center, the project is both a visual and a social anchor for the area, which had almost no housing before its construction.
Both the City Hall and Park Place are on Castro Street, the city’s traditional retail strip. The city’s redevelopment efforts have fostered a new row of one- and two-story storefronts along Castro.
City officials believe that a new six-story, 150,000-square-foot office building about three blocks from Park Place, to be developed by Tishman Speyer of New York, will further strengthen downtown Mountain View by adding 350 more office workers to the daytime population. Construction is expected to begin later this year.
Ralph Faravelli, a city councilman who is a native of Mountain View, said Park Place was part of a larger ambition to provide Mountain View, which has very few active public areas, with an active street life.
“Fifteen years ago, you could throw a bowling ball down Castro Street and never hit anybody,” he said.
