City Grill

Photo courtesy Gensler

Brian Corbett 
Managing Director
Gensler

While the forecast for the San Jose construction market looks bullish, mounting headwinds may warrant caution. The region remains one of the most expensive construction and labor markets in the world, and budgets are straining due to a number of factors including high interest rates, ongoing inflation and increased costs of materials.

“Contractors are increasingly diversifying their project types to weather the downturn and fill gaps left by the office sector’s decline,” Corbett says. “Tech clients, once the key drivers of development in San Jose, are now adopting more conservative capital expenditure strategies, affecting the pipeline of new projects.”

The demand for mixed-use projects is rising, and developers are pivoting toward projects that combine residential, retail and entertainment components to create compelling destinations. Adaptive reuse of office spaces is becoming an increasingly prominent trend.

“The city and developers are shifting focus toward future development centered around mixed-use, residential and entertainment as a social hub in the South Bay,” he says.