San Jose city leaders have signed off on a plan to attract new businesses downtown — including a two-year business tax exemption — hoping that the short-term benefits offered will lead to long-term growth and vibrancy.
The leasing incentive program, which will go into effect on Jan. 1, includes a temporary business tax exemption for new owner-operators and tenants that lease at least 2,500 square feet of office space for a minimum of four years. The program also includes two free parking spots per 1,000 square feet for the first two years, bringing the potential savings for large businesses up to hundreds of thousands of dollars.
While the incentives mean San Jose will lose out on new downtown taxes and parking revenue that could eclipse to nearly $1 million a year, city officials believe the economic benefits from more workers in the area and locking in businesses over the long haul are worth the trade-off.
“Having a bustling downtown during the week is key to supporting our local shops and restaurants and personal life and if we have daytime foot traffic, the small businesses will come,” said District 3 Councilmember Omar Torres at Tuesday’s City Council meeting where the program was unanimously approved. “The companies are bringing back their employees to the office and now is a perfect time to bring more office tenants into our downtown. This incentive will help long-established businesses stay but also thrive during the weekday, not just in the evenings or weekends.”
Downtown San Jose’s night and weekend foot traffic has experienced a renaissance over the past two years — recovering to pre-pandemic levels and marking the eighth largest rebound in the nation — according to a University of Toronto Study that tracked activity using cell phone data.
City and business leaders attributed a large part of that to the experience economy San Jose has built, including robust arts and culture offerings that contributed $292 million in economic activity, according to the most recent Arts & Economic Prosperity study.
But while downtown bustles when the sun goes down, daytime activity continues to stall as office vacancies remain well above pre-pandemic levels.
According to data from real estate firm CoStar, vacancies in downtown San Jose exceeded 31% through the second quarter of this year, up from 12% in 2019. Return-to-office protocols and the new paradigm caused by COVID-19 have forced businesses to adjust their office needs — either by shrinking footprints or seeking higher quality, amenity-rich spaces — prompting the need for incentives to stabilize the downtown market.
“For a lot of businesses, it doesn’t pencil financially, so they’re not renewing their leases,” San Jose Downtown Association CEO Alex Stettinski said in an interview with The Mercury News. “We have a vacancy rate that is substantial, so we have to creatively find ways to push businesses over the edge with financial incentives.”
San Jose has taken a “portfolio approach” to spur economic growth downtown, which city officials have designs on turning into a live, work and play destination.
Earlier this year, the city extended …read more
Source:: The Mercury News – Entertainment
