Urban Catalyst Forges Ahead on Bay Area Towers

Icon/Echo Towers Rendering. Image courtesy of Urban Catalyst

Silicon Valley Opportunity Zone Fund Urban Catalyst is moving forward with Icon/Echo Towers, a high-rise office and residential project in downtown San Jose, Calif. The company has expanded the project site with the acquisition of a parcel at 77 N. Fourth St. The purchase comes less than a year after Urban Catalyst launched its second opportunity zone fund with the goal of raising $200 million for the project.

The company paid $9.5 million for the latest parcel, according to Santa Clara County records. The plot is the third of four parcels needed for the development. Urban Catalyst is set to close the acquisition of the last plot at the end of the year.

In July 2021, the company submitted formal entitlements and received approval of its initial tentative map for the project land. Icon/Echo has been in the works since 2019, when Urban Catalyst acquired 147 E. Santa Clara St. for nearly $15.9 million, followed by the purchase of 49 N. Fourth St. in 2021 for $16 million, according public records. Construction is expected to start next year and will require the demolition of several existing structures.

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Urban Catalyst selected WRNS Studio to design the buildings. According to plans revealed last year, the 282-foot Icon tower will encompass 420,000 square feet of office space, which will be able to accommodate more than 2,000 employees. The adjacent 27-story Echo tower is expected to house 500 residents in more than 300 apartments. Both buildings are set to include rooftop terraces and outdoor areas. The project is estimated to cost $600 million, according to a Silicon Valley Business Journal article. 

Icon/Echo will be within walking distance of St. James Park and San Jose State University. The development site is also one block away from an upcoming Bay Area Rapid Transit Station connecting the Peninsula and the East Bay Area. 

Urban Catalyst kept busy last year developing the projects sponsored through its Fund I, which closed in December 2020 after raising $131 million. One of the six projects included in Fund I is the conversion of the former Camera 12 theatre in San Jose into an office and retail building. In August 2021, the company closed on a $56.2 million senior construction loan provided by Rialto Capital for the mixed-use project. The 100,000-square-foot redevelopment is slated for completion this summer. 

Overcoming hurdles

The San Jose office market is bound to experience more setbacks in its recovery process due to the surge of new cases brought on by the Omicron variant. Recently, many Silicon Valley companies announced they will be delaying return-to-office plans for spring or indefinitely.

In the 12 months ending in November, office vacancy in the Bay Area increased by 220 basis points, reaching 16 percent, the latest CommercialEdge report shows. The figure is 80 basis points above the national rate.

But despite the challenges ahead, investors are still keen on the Bay Area. The market led the way for investment volume, with transactions totaling $7.7 billion in the first 11 months of 2021. Development activity was also relatively lively, with some 4,7 million feet of office space under construction as of November.