Startup tech firm pulls out of high rise towers project in downtown San Jose

SAN JOSE, Calif. - A real estate development project in downtown San Jose is in limbo after a tech investor decided to pull out. Local real estate and economic experts say competition from other cities may be a factor. 

This time last year, startup tech company Nabr was all in on a 3-tower housing project. Now the company has returned people’s deposits and they’re heading out of San Jose.  

Three downtown San Jose towers to be located on South 2nd and 3rd Streets and spearheaded by real estate development firm Urban Community, are in need of a new investor. Startup tech firm Nabr decided to withdraw from the projects and returned deposits to applicants. Abby Raisz is a Sr. Research Manager with the Bay Area Council Economic Institute. 

"So many new fees start to get added on that make it so expensive that the cost of building new housing outpaces the revenue that these developers can generate through rents or sales," Raisz said. 

Nabr’s plan for the towers included allowing people to customize their unit within a lease-to-own agreement but Raisz says economic uncertainty overall may also have played a role in their withdrawal.  

"There are soaring interest rates, right? We have this uncertain economic climate. We have declining stock prices that people are talking about and fears of a recession," Raisz said.   

Some retail projects are also experiencing delays throughout the Bay Area. The Newmark Group manages the Sixth & Jackson Apartments in San Jose and says construction costs and development timelines in conjunction with city timelines have caused delays with potential retail tenants at the property.  

"You do find someone there; you go to the city to get permits. They’re extremely understaffed, now they’re threatening a strike. You go, and you build it, then you have to get inspections and inspections are backlogged," said Bob Staedler, Principal for Silicon Valley Synergy, a commercial real estate consulting firm.      

Staedler was involved in developing the 6th & Jackson Apts. and says even with the challenges facing housing and retailers, San Jose is still a viable city where development will continue.  

"When you look at what’s already built, the offices are around 20%+ vacant, but the metrics of everything being downtown; light rail Diridon station just down the way. I think that’s why people still want to come downtown," Staedler said.  

Staedler says the developer will simply have to find another partner for the towers project. 

KTVU reached out to Urban Community and Nabr for comment but didn’t hear back from them in time for this report.