October 13, 2024
UPDATE: San Jose approves tax breaks to fill empty office space

San Jose city leaders want to entice new businesses into filling empty office space in Downtown San Jose with perks that can save them money.

The City Council voted unanimously Tuesday to approve a policy for any new business looking for a minimum of 2,500 square feet to be exempt from paying city business taxes and fees for at least five parking permits for two years. To qualify a business needs to lease space for at least four years between January 2025 and December 2026.

“This incentive will help long established businesses stay and also thrive during the weekday, not just in the evenings or weekends,” Councilmember Omar Torres, who represents the downtown, said. “We’re telling our stakeholders and potential investors that downtown is open for business.”

Representatives from organizations like Republic Services, San Jose Jazz and the Sharks expressed support of the policy.

Owner of Haberdasher bar and co-owner of Cash Only bar Tomoyo Yoshinaga told city councilmembers at the meeting she’s glad they are finding ways to motivate businesses to reinvest in downtown.

“We’re opening a third bar just half a walk away, and having more people downtown would definitely help the spending,” she said.

Bayview Development Group Chief Investment Officer Ted McMahon said San Jose should extend the two-year exemption to as long as seven years to be more consistent with average commercial lease terms.

San Jose has more than 3 million square feet of vacant office space downtown, according to city officials.

Downtown Manager Nathan Donato-Weinstein said they must publicly disclose any business receiving more than $100,000 in savings from the policy incentives, similar to the Downtown High-Rise Program tax incentives, which give developers a discount in construction taxes and park fees.

Councilmember Pam Foley said Tuesday they should find a way to incentivize current tenants to renew and expand their leases.

“I’m really excited about this (policy) — but let’s make this bigger,” she said.

Office spaces of at least 2,500 square feet are typically large enough for about 12 employees, Joint Venture Silicon Valley President & CEO Russell Hancock said.

Office vacancies in downtown San Jose are still at record highs years after the pandemic, and the city’s proposed policy of tax breaks and free parking could incentivize more businesses to sign leases and employees to spend more time in an office post-pandemic.

Hancock described the situation in downtown as a new paradigm.

“Here’s the city saying, ‘Ok, how can we find an opportunity, given these new realities, to look at small and medium-sized businesses and see if they have any interest in putting some roots down,’” Hancock told San José Spotlight. “Cities have to be rich, mixed-use and combine all the (elements).”

Small businesses continue to struggle in the downtown with office workers on hybrid schedules or remote.

Mayor Matt Mahan described the office incentives policy as his latest effort in bringing more office workers to downtown, along with new murals, restaurants and dessert stops.

He said Tuesday that the more new small businesses the city can incentivize into downtown the more likely they will see another company like Zoom that grew to be “anchor employers” in San Jose.

“Betting on small businesses can be a real bet on our future as a city,” Mahan said at the meeting.

Yacanex Posadas, who owns Yacanex Business Group in Gilroy and helps grow small businesses in places like downtown San Jose, said he’s supportive of the city’s new policy and sees the parking benefits as an especially attractive for businesses wanting to lease in this section of the city.
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He said small businesses that might not need as much as 2,500 square feet of space should consider partnering with fellow small business owners to split space and rent costs.

The more businesses that get together to share offices and expenses, he said, the larger and better space they can afford.

“Maybe you’re an insurance agent, someone else is in real estate and another person works with taxes — they don’t work together but they need office space,” Posadas told San José Spotlight. “We shouldn’t be just looking at this black and white.”

The San Jose City Council meets Tuesday at 1:30 p.m. Learn how to watch and participate.

Contact Vicente Vera at [email protected] or follow @VicenteJVera on X, formerly known as Twitter.

 

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