San Jose celebrates new high-rise rental apartments

SAN JOSE, Calif. (KGO) -- Many people have seen how the housing market can go through boom or bust cycles. Right now, developers are investing millions of dollars in downtown San Jose as a desirable place to rent a high-rise apartment. The city wants more people living downtown to support its restaurants and stores. Is it a big risk or a good bet?

San Jose's newest high-rise is at One South Market, a $135 million project that will have retail stores at ground-level and rental apartments upstairs. On Friday, San Jose celebrated the new building, which reaches a full 23 stories. A year from now, it will offer 312 apartments for rent, part of a city initiative to raise the downtown population from 800 to 2,500.

"We have to keep building. We have to incentivize building. We have to incentivize affordable housing and really have a complete balance of the types of homes that are available to those who are working here in Silicon Valley," San Jose City Council Member Ash Kalra told ABC7 News.

Even more rental high-rises are underway or planned and 4,200 new apartments will be available this year. That's an increase of 1,000 over last year according to Marcus & Millichap, which analyzes real estate markets for investors. San Jose's city-wide vacancy rate is 3.6 percent. Downtown, it's even tighter at 2.4 percent.

Developers and investors see a changing market. While some renters might be young tech workers not ready to buy, a growing segment is made up of couples, some with children, who want to live downtown -- people like Jodi Garg.

"We have a daughter and we love the fact that you've got the children's museum right across the street. You've got the great library at the university that has a lot of children's programs, and we love San Pedro Square. We go there quite a bit on the weekend, and we don't even get in our car. We just walk everywhere," Garg said.

Garg lives at 360 Residences, which was built originally as condos. The rooms are spacious, the appliances high-end, and the views are panoramic. A two-bedroom, nearly 1,700-square foot unit rents for about $2,700.

But is San Jose over-building?

"Most of these rental projects are being built with condo maps so they could be sold as condos someday. And as the market changes, we may get into a for-sale situation. They're trying to be flexible, give people a chance to rent, and then when the economy is better in terms of financing, people will be able to buy," said San Jose Mayor Chuck Reed.