California Commercial Real Estate Forecasts Slower Growth Ahead

California may be easing into a soft landing with signs of “ebbing optimism” among developers on the three-year outlook for the state’s commercial and multifamily real estate markets.

The new Summer/Fall 2017 Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey indicates slower growth ahead in office, retail, and industrial. One of the goals of the survey, which is now in its tenth year, is to address “turning points” in the market, says Jerry Nickelsburg, director of the UCLA Anderson Forecast. “What is significant about the latest survey is that we are now seeing the turning points in most aspects of commercial real estate in California,” he says.

The survey asks respondents where they think rental rates and vacancies will be three years from now. After hitting “rock bottom” in late 2009, the U.S. economy has been moving forward with steady growth for the past seven years, says John Tipton, a real estate partner at Allen Matkins. “So, it is not surprising to see some of the confidence waning,” he says. “Where it gets to be a little more concerning is where you have this more persistent pessimism.”

In the office market, for example, Silicon Valley, San Francisco, and the East Bay led the office market out of the recession. Those markets jumped out as the hottest and fastest-recovering markets. Now all three are below 50 on the survey’s sentiment index, which is the “neutral” line between pessimism and optimism. Orange County and San Diego also saw survey sentiment dip below 50. “That leads one to believe that there could be a little bit more of a correction on the horizon,” notes Tipton.

The bright spot in office is Los Angeles, where things have not only remained positive, at 57.5, but there also has been a slight increase in the amount of optimism as compared with the last survey that published in December. Multifamily also saw an uptick in sentiment as compared with the last survey that was published in December. So, it is important to note that sentiment is not cooling across the board, Tipton adds.

Multifamily has been one of the two sectors of the survey, industrial being the other, that has consistently recorded positive sentiment. However, there was a sharp drop in multifamily sentiment in the December 2016 survey. The view at that time was that the market had been so hot for so long that it was natural that growth was slowing and sentiment was cooling, notes Tipton.

However, the results of this survey show that sentiment has rebounded, particularly in Silicon Valley and San Francisco, where sentiment dropped to nearly 40. Some factors contributing to the reversal in sentiment include strong employment growth and income gains, both of which support demand for rental housing. In every market, developers are optimistic about the course of rental and occupancy rates for the next three years, and three-fourths of survey respondents said they plan to start a new project in the coming year, with over one-half of them starting more than one project.

Office Sentiment Is Mixed

The outlook for office is continuing to trend lower. The office sentiment index has dropped from highs near 80 to below 50. The index went below 50 for San Francisco two years ago, and below 50 for Silicon Valley and the East Bay in June 2016. Despite healthy unemployment levels that are now at 4.4 percent, panelists are concerned that occupancies will not be able to maintain current levels and that rents will not be able to keep up with inflation.

Respondents are more bullish on the outlook for Los Angeles. Downtown L.A. in particular is in the midst of a building boom. In contrast, survey results highlighted some potential warning signs in the Bay Area where sentiment remains at a low of 38.85. However, some industry experts are more confident that the market still has good growth potential.

Eighteen months ago, the San Francisco office market saw a pause in demand. Companies started shedding space, the sublease market picked up, and rents have been flat for 18 to 24 months, notes Meade N. Boutwell, a senior vice president, brokerage services, at CBRE in San Francisco. In part, that was a cooling of a six-year hot streak, adds Boutwell. “At this moment in time, demand is strong and even getting a little stronger,” he says.

San Francisco also has a cap on its development pipeline that has been in place for some 30-plus years. That cap tends to keep new supply in check. “Essentially, we have reached that cap and the supply is going to be very restricted going forward,” says Boutwell. That cap also could create some additional upward pressure on rents, he adds.

Push/Pull Continues in Retail and Industrial

Industrial has benefited from the disruptive impact that e-commerce is having on the retail sector, with more companies focused on the delivery of retail goods bought online. However, both retail and industrial saw cooling of sentiment in the current survey. Developer sentiment is trending negative, at or below an index level of 50 for Silicon Valley, East Bay, San Francisco, and the Inland Empire, while developers are more positive about opportunities in Orange County, Los Angeles, and San Diego.

The interpretation of those results from the UCLA economists is that even though there has been a pullback in sentiment regarding the industrial outlook, it may indicate a shift from a “white hot” market to a “red hot” market. The majority of survey respondents (87 percent) started new projects last year and all said they will be active with existing or new projects this year. Part of that cooling sentiment may be influenced by the fact that there is some natural constraint on new supply. There are not a lot of industrial areas to develop in urban areas, such as Los Angeles or San Francisco, as compared with other markets like the Inland Empire, notes Tipton.

The other side of the e-commerce coin is retail, which continues to struggle with increased competition and changing omni-channel business models. Those surveyed are bracing for a retail sector that will look worse in 2020 than it does today. In fact, sentiment across all six California markets declined in the most recent survey, with a high rating of neutral, or 50, in Silicon Valley, and with Orange County on the low end with sentiment dropping to 38.7.

One of the takeaways from this survey is that sentiment is cooling, which is not unexpected after seven years of growth. However, there are still challenges and opportunities in the California commercial real estate market, notes Tipton. “A rising or falling tide does affect all boats, but at the end of the day, when you are making investment decisions, you are trying to look at a specific location,” he says. “It’s not like buying a stock. You are literally looking at this street corner, this product type, and making those investment decisions.”

6 Reasons to Attend an Open House..Even if your not Buying a Home

Perusing online real estate listings can be nothing less than addictive. We've all spent time scouring the internet, ogling homes for sale that we don't intend—or can't afford—to buy. Because it's fun!

But would you ever hop in the car and go look at a house in person, even if you're not at all ready to make an offer?

Before you dismiss the idea, consider what you stand to gain by turning house hunting into an extracurricular activity.

Sure, it might seem nosy at first—and we're certainly not encouraging you to be a straight-up looky-loo. But regardless of whether buying or selling is in your near or distant future, there are many benefits to going to an open house.

Like what? We're glad you asked! Here are six solid reasons to hit up an open house next weekend.

Reason No. 1: Learn more about what you can afford

What you want to buy and what you can afford to buy are often two very different things.

Unfortunately, you don't always figure that out until you're deep in the process of house hunting, perhaps with your heart set on a dream home that will drain your finances and make you house-poor.

"Many first-time home buyers ask me to find them something that doesn't exist,” says Melissa Colabella, licensed real estate salesperson with Julia B. Fee Sotheby's International Realty, in Irvington, NY. “They are often shocked to learn that single-family homes do not even exist in their price range in their preferred neighborhoods.”

Attending open houses lets you get a grip on what you can realistically expect to find in your budget. Sure, you can enter a price range online on realtor.com®—but remember that perusing online listings is only the first step of the process. Often, actual homes look quite different from their online photos, which can be focused on or touched up to show only the best parts of the property.

Reason No. 2: See the agent in action

Even if you don’t find your dream home, you might meet your dream agent. What better way to interview the candidates who could represent you on either side of the transaction than by seeing them in action, points out Realtor® Patrick Madigan, owner of Madigan Realty, in Raleigh, NC.

While most sellers interview multiple agents to find the best fit, he finds buyers rarely do—which can be a mistake.

“Open houses present a great opportunity to get multiple face-to-face appointments with potential agents, without having to set up a formal appointment to interview them,” he says.

Be alert to whether the agent engages you when you first come in or is too busy to acknowledge and help you. And come armed with a few insightful questions about the local market to see if the agent seems knowledgeable about more than just that one open house, Madigan suggests.

Reason No. 3: Check out the competition

Traffic at an open house can be a gauge for whether the sellers have found a sweet spot with their price, since a new listing should be attracting multiple visitors when priced correctly.

If you’re a buyer, the number of visitors can indicate how quickly you might need to pounce when you decide you’re ready. (And it can tell you how to price your own home to move fast if you’re selling.)

“Some markets will allow for you to have a few days to mull over your decision, but an open house with 34 visitors can indicate your offer needs to be submitted right away,” Colabella says.

You'll also get a face-to-face look at your competition. If you listen carefully, you might pick up some intel about the kind of buyer the seller is looking for. Even if you don't intend to buy this house, the info might come in handy down the road.

Reason No. 4: Get a feel for the neighborhood

If you’re looking in a new, largely unfamiliar community, browsing for a few months can tell you a lot about your potential neighbors. You’ll get a sense for who primarily lives there (e.g., families, retirees, or singles), whether the neighborhood is abuzz with block parties and other events, or if it's mostly quiet. Plus, you'll get the chance to meet other prospective buyers, and learn where they’re relocating from and what they’re looking for in their new community.

“Of course buyers come in every demographic, but sometimes the patterns are surprising,” Colabella says.

Reason No. 5: Learn more about your needs

“As first-time homeowners, we weren't sure yet what we were looking for exactly beyond the number of bedrooms and bathrooms," McGrath says. "The open houses helped us learn more about layouts and amenities we liked.”

In fact, you might be surprised by what you gravitate toward when you really look around, Colabella notes.

“Often buyers think they want charming, older homes but then decide newer construction better fits their needs," she says. "Or they start with houses and then switch to townhomes or condos after losing sleep over the concept of homeownership maintenance.”

Reason No. 6: Do some design recon

Wouldn’t you love to have someone give that designer touch to your house? Many homes for sale have been professionally staged or recently fixed up, so an open house can give you insight into the latest design trends. And since they’re often done on a budget, it can get those creative juices flowing for how you could incorporate wallet-friendly tricks to spruce up your space (like opening up your space with strategically placed mirrors).

And, if you’re preparing to sell your house, you can use open houses to pick up some staging tips of your own. Notice what you pay attention to and how little touches—such as fresh towels and empty closets—can make a big difference.

San Francisco Median Home Price Rises to $1.4 Million

Despite 2016’s general loss of inertia, Paragon Real Estate Group now reports that the price of a house in San Francisco is up to a median of $1.4 million in the first half of 2017.

Paragon economist Patrick Carlisle notes that in 1996 the same price was a mere $274,000, although according to the Bureau of Labor Statistics’ inflation formula that comes out to nearly $434,700 in today’s currency.

At the time that was double the national average. But in the first half of 2017 Paragon calculates the median price of a house in the United States as $240K, just less than one-sixth the SF price. (And also still less than the city’s median from 21 years ago.)

The St. Louis Federal Reserve presently marks the nationwide price of a house at just over $310K, so there is some room to debate the size of the gap.

But since even that more conservative estimate leaves SF real estate 4.5 times more expensive than the rest of the country, it’s an intimidating landscape no matter what.

Carlisle pegs the median in San Mateo County at $1.38 million, Marin County at $1.26 million, and Santa Clara County at $1.13 million.

Alameda County overall is $855K, while the city of Oakland comes out to $715K.

Solano County has the lowest median, according to Paragon, at $406K, 1.3 to 1.6 times the nationwide figure, depending on the estimate.

Breaking down prices by neighborhood in each county, the rankings go:

• Pacific + Presidio Heights, SF: $6.18 million.
• Atherton, San Mateo County: $4.85 million.
• Los Altos Hill, Santa Clara County: $4.18 million.
• Belvedere, Marin County: $3.7 million.
• Piedmont, Alameda County: $2 million.
• Alamo, Contra Costa County: $1.63 million.
• Rockridge, Oakland: $1.52 million.
• St Helena, Napa County: $1.36 million.
• Healdsburg, Sonoma County: $864K.
• Benician, Solano County: $625K.
• 
  

Carlisle notes that although it’s less visibly pricey than many surrounding cities and less pricey than SF in particular, Oakland remains the city to watch out of the pack:

SF has had the highest compound annual rate since 1996: It is the epicenter of the Bay Area high-tech, bio-tech and fin-tech economic miracle.

But Oakland soars above all other markets in appreciation since 2011, because of a combination of factors: It is the closest affordable alternative to much higher SF prices; it is a lively, multi-cultural urban area appealing to high-tech workers; and its housing prices dropped an astounding 60% after the 2008 crash.

He adds, “We now recommend that all our clients go back in time to 1995 or 2011 and buy as many homes as possible.” If only it were that easy.

How Long Can the Bay Area Real Estate Boom Continue?

Since 2012, Bay Area home prices have increased an average of 72%, based on market research conducted by Paragon Real Estate Group. It cited dwindling affordability as a symptom of an overheating market.

The median Bay Area home price hit a record $755,000 in May, the third consecutive monthly record, according to the data analytics firm CoreLogic. However, there was a slight decrease in home prices between April and May.

Median home prices rose 3.1% in Alameda County between May 2016 and May 2017, but declined 1.1% between April and May of this year, according to CoreLogic. In Contra Costa County, home prices rose 6.5% between May 2016 and May 2017 but declined 0.7% between April and May of this year.

“We started seeing the latest round of price increases beginning in 2012,” said housing policy expert Carol Galante, faculty director of the Terner Center for Housing Innovation at UC Berkeley. “It’s moderated a tad in San Francisco, which has brought on some more supply of housing; but in the East Bay prices haven’t moderated at all because there’s not much new supply of housing.”

Other areas becoming more competitive than Bay Area

It’s no secret that the Bay Area’s housing price boom and crisis in housing affordability is largely due to decades of job creation exceeding development of new housing, said Jordan Levine, senior economist at the California Association of Realtors, who sees regions centering on Austin, Denver, Portland and Seattle as becoming economically more competitive than the Bay Area.

Galante said there are concerns that the current real estate boom risks making the Bay Area’s economy unsustainable. As more people are priced out of the local housing market, they will move further and further afield, or jobs will leave the Bay Area and the region will suffer economically, she said.

There may come a day when major tech employers seeking to attract talent will say enough is enough with housing costs in the Bay Area and decide to relocate elsewhere, potentially changing the economic dynamics of the region from growth to a downward cycle, she said.

Levine agrees with that assessment: “It’s going to be a tough sell if you want companies to keep creating jobs in the Bay Area if housing remains unaffordable.”

There are examples of this happening to a small degree already. Zapier, an apps integration company headquartered in Mountain View, offered its employees up to $10,000 in relocation reimbursements if they moved out of the Bay Area.

Galante doesn’t think, however, there will be a real estate collapse like there was after the dotcom crash of the 1990s and the recession of 2008, with their massive job losses.

There has been some recent slowdown in new tech jobs, but the local tech economy is still thriving, driven by Google and Facebook, she added.

“I can’t say how this boom will end, but I don’t think it will be a total crash like 2008,” said Galante.

Real estate booms and busts are cyclical but people often have an exaggerated notion about how long each will last, according to an updated report released in June by Paragon, which tracks housing market cycles in the Bay Area. But it doesn’t work that way.

In the aftermath of a real estate “bubble popping” (or market adjustment), the recovery period typically lasts five to seven years before the next downturn. “We are currently about five years into the current recovery, which started in early 2012,” the Paragon report said.

Predicting timing of cycles extremely difficult

It is still extremely difficult to predict with any accuracy when different parts of the cycle will begin or end. Market adjustments are not always necessarily devastating crashes, but sometimes can be more like air being released from an over-inflated tire.

Typically, housing at the lowest price range in less affluent neighborhoods experiences the greatest price appreciation and biggest price declines — during booms and busts. This year the market for more moderate priced housing remains “quite hot” with prices continuing to appreciate quickly, while the prices paid for more expensive homes have plateaued, according to the Paragon data. Prices for condos have declined.

If business as usual continues, the Bay Area faces a further hollowing out of its middle-income residents, continuing increases in home prices, larger household sizes for the less wealthy, more long-distance commuters, and more residents who live on investment incomes, rather than wages, according to the Association of Bay Area Governments (ABAG).

With the population of the Bay Area projected to reach 9.5 million by 2040, new housing construction needs to return to levels of production not seen since the 1980s to support the best scenario of sustained economic growth with new job creation and affordable housing, according to the Regional Forecast for Plan Bay Area 2040, a report produced by ABAG.

Top 20 List of the Hottest Real Estate Markets

Are you ready for the housing market's Endless Summer? At least it might feel endless, because there seems to be no end in sight for the national housing shortage now that we're waist-deep in the busiest season for buying and selling, according to a preliminary analysis of June data by realtor.com®.

With limited growth in for-sale homes, prices remained high. Just a few months ago, the nationwide median home price pushed above $250,000 for the first time. We're predicting it will hit $275,000 when we close out June—an increase of 9% since one year ago.

“The housing market has now gone 24 months in a row seeing inventory drop on a yearly basis, the longest streak in over two decades," said Javier Vivas, manager of economic research at realtor.com, in a statement. The shortage is hitting even more markets, he added—8 out of every 10 have fewer homes for sale now than this time last year.


June 2017 Hot List:

Rank (June)	20 Hottest Markets	Rank (May)	Rank Change
1	Vallejo, CA	1	0
2	San Francisco, CA	2	0
3	Kennewick, WA	5	2
4	Sacramento, CA	4	0
5	Columbus, OH	7	2
6	Detroit, MI	18	12
7	Boston, MA	3	-4
8	Colorado Springs, CO	6	-2
9	San Jose, CA	7	-2
10	San Diego, CA	16	6
11	Dallas, TX	12	1
12	Waco, TX	30	18
13	Grand Rapids, MI	13	0
14	Stockton, CA	10	-4
15	Midland, TX	8	-7
16	Fort Wayne, IN	11	-5
17	Santa Rosa, CA	19	2
18	Denver, CO	17	-1
19	Yuba City, CA	21	2
20	Modesto, CA	23	3

And that shortage is reflected in how fast homes are snapped up. Properties in June spend a median 60 days on the market—the same level as May, but five days faster than in June 2016.

It's not that homes aren't being listed for sale—in fact, 536,000 new listings entered the market in June. But total inventory is substantially lower than one year ago, at 11%. Plus, those new listings are primarily in the upper tier of the market, leaving middle- and lower-income buyers to fight it out over what's left.

"Most of this fresh inventory isn’t addressing the largest, most desperate group of buyers," said Vivas. "With no clear hints of new construction providing short-term relief, there appears to be no end to the inventory shortage on the horizon."

Amid all this, Vivas' team assessed the country's biggest metropolitan markets to find which were buzzing the most with buyer activity, in terms of listings clicked on our site and homes speeding off the market on their way to new owners. As is the norm in recent years, our top 20 is a list dominated by California, but seven other states made a showing, and a couple of big movers hail from the Midwest.

The top two spots are still held by the double threat of Vallejo, CA, and its infinitely swankier neighbor to the south, San Francisco. The San Francisco Bay Area's economic influence reached eastward to Sacramento, which has absorbed many San Franciscans fleeing that city's high prices. Sacramento sits at No. 4 on our hot list, after Kennewick, WA. And Columbus, OH, reached the top five for the first time in our ranking. Detroit, which fell just short of joining the club, moved up an impressive 12 spots since last month.

Tight Inventory Keeps Bay Area Home Prices Rising

The Bay Area housing market is tight, and it keeps getting tighter. A new second-quarter analysis by Trulia shows that the housing supply shrank from a year earlier in the San Jose and San Francisco metros, though the inventory expanded in the Oakland metro.

The problem is that the inventory was alarmingly low to begin with — only 1,269 homes came to market during the entire second quarter in the San Francisco metro, which includes San Mateo County. That said, there is a whiff of good news for first-time homebuyers: the number of starter-homes rose throughout the region: by 10.9 percent in Oakland, by 24.1 percent in San Jose and by 26.1 percent in San Francisco.

You’re feeling excited? Don’t. For those in the starter home market — the lower third of homes, value-wise — the percentage of income required to buy such a home in San Jose is 78.4 percent, Trulia says, compared with a crushing 99.6 percent in San Francisco and 60.5 percent in Oakland. Across the board, it’s a heavy burden for any buyer.

The median price of a starter home is $286,300 in Oakland, $445,667 in San Jose and $535,823 in San Francisco, the report says.

Yet competition for the limited home supply remains fierce. In fact, San Jose is the “fastest” market in the U.S., according to Trulia, with houses being snapped up in record time across all price ranges. Only 20.0 percent of homes remained unsold after two months in San Jose, compared with 20.3 percent in Oakland (the nation’s second fastest market) and 23.7 percent in San Francisco (the fourth fastest market).

Google's Downtown San Jose Development Project: Boom for Some, Bust for Others

SAN JOSE — While San Jose city officials and property developers are over the moon about Google’s quest to create a massive village of gleaming new tech offices and housing downtown, some local merchants fear the project could displace their shops and send them packing.

The city announced this week that the Mountain View-based search giant wants to create a huge tech campus, covering more than 6 million square feet on about 245 acres near Diridon Station and the SAP Center. It said the project could accommodate up to 20,000 employees and transform downtown. But as real estate developers continue buying up properties in the area, amassing land that could end up in Google’s hands, many local business owners have mixed feelings about what it might mean for them.

“I’m worried about having to move,” said Edgar Salcedo, owner of Ed’s Scientific Auto Body, which has been a fixture on South Autumn Street in the core area where Google intends to build a mega campus even larger than its Googleplex headquarters. “We’ll make it work somehow. But I don’t know if my customers will find us if we have to move.”

The prospect of San Jose becoming another Google town would mean more employment opportunities, particularly for skilled tech workers, and would be an economic boon for the city’s downtown.

“This is an unparalleled opportunity for San Jose,” said Nanci Klein, San Jose’s deputy director of economic development. “We are thrilled to have this interest from Google and to have this excellent partner, a world-class company that is committed to sustainability and great urban design.”

Yet, depending upon how it is implemented, the project could bring more of the headaches that have accompanied the expansion of Silicon Valley’s most innovative and disruptive companies: The same job boom that has driven Bay Area employment to record levels also has lifted home prices well out of reach for a growing number of residents, caused traffic jams and forced more people to flee the Bay Area altogether.

Nevertheless, Google would bring San Jose the prestige of being a key hub for one of the world’s largest companies, and create a transit-focused village where people could work, live and play.

“We’re excited to have the support of the San Jose City Council as we evaluate our options at Diridon Station,” a Google spokesperson said in comments emailed to this news organization. “We look forward to collaborating with officials and community members.”

Real estate experts believe Google’s push into downtown San Jose would be a game-changer similar to the dramatic reshaping of San Francisco’s eastern waterfront.

“Google is a digital nation-state, and they are going to transform Diridon Station the same way that Mission Bay in San Francisco has been transformed,” said Mark Ritchie, president of San Jose-based real estate firm Ritchie Commercial.

Some businesses that own their properties have already struck deals with Trammell Crow, a developer and Google property-buying surrogate, to sell their land. Through affiliates, Trammel Crow has been quietly buying up properties in the 245-acre area near SAP Center and Diridon Station, primarily along and near Autumn and Montgomery streets.

Other merchants who rent their buildings might be forced to relocate or close if Trammell Crow snaps up the properties.

“Our family depends on this business, and if we lose the business, it would be catastrophic,” said Rocio Salcedo, owner of Diamond Auto Detail on South Autumn Street and sister of Edgar Salcedo. Her business, next door to her brother’s auto body shop, has served customers at the same location for about 30 years.

For the second time in a decade, Tito Hernandez, owner of World of Sports Memorabilia on South Montgomery Street, faces relocation because of a new development if his landlord decides to sell the property that contains his business.

“We used to be on Stockton Avenue, but I had to move when Whole Foods went in there” in 2010, Hernandez said. “I would love to stay in San Jose, but it looks like I might be moving again.”

Some business owners in the Diridon Station neighborhood lament the dramatic changes that the technology industry has ushered in for the Bay Area.

“The whole culture of the Bay Area is being killed by this tech boom,” said Charles Vela, co-owner of C&C Architectural Glass on South Autumn Street. “People in service businesses, people who flip burgers, are being forced out of San Jose, forced out of the Bay Area.”

Nevertheless, Vela seemed to understand the motives of his company’s landlord, whom he and his wife described as a nice lady.

“Trammell Crow offered our landlord a lot, and it’s an opportunity for her, and we would probably do the same thing if we were in her place,” Vela said.

Eva Vela, co-owner of C&C Architectural Glass, said she and her husband might look for a new location in a nearby city where commercial rents won’t be brutally high.

“We’ve been looking in Morgan Hill,” Eva Vela said. “It would be nice to get some assistance from the city to help us move.”

Several business owners in the area agreed, but the city suggested it would only be obliged to aid those displaced from government-owned properties.

It’s possible that tenants renting from private property owners who sell their land in connection with the Google project could get no assistance.

“There are not that many tenants in this area that are on public property,” Klein said. “The city only has an obligation to provide relocation assistance when tenant is on public land.”

Google’s plans for downtown San Jose have emerged as two groups of property investors have quietly launched a shopping spree for properties in the Diridon Station area, a land assembly that could eventually accommodate one or more mega-campuses for tech workers, along with housing and stores. The two groups of buyers have spent a combined $124 million in the acquisition binge.

Several more sales are already in the works, with some deals due to close before the end of the summer. In some of those cases, the business owner also owns the property.

Jim Wagner, principal owner of Kearney Pattern Works and Foundry on South Montgomery, said his aluminum foundry has been in business for nearly a century, and he has mixed feelings about his decision to sell to Trammell Crow.

“We have had a feeling that we don’t have much of a choice about staying, especially after Trammell Crow gobbled up all the properties on the other side of Los Gatos Creek,” Wagner said. “If we didn’t sell, the city might take the property through eminent domain.”

The company over the decades has served customers including Lockheed Missiles and Space, and the defense contractor’s production of the famed Trident nuclear missile. Current customers include KLA Tencor and Lam Research, which have placed a steady stream of orders for their semiconductor equipment business.

“It’s sad to think about closing the business,” Wagner said.

Borch’s Iron Works & Welding was planning to close anyway, but Allan Borch, owner of the metal business on South Autumn Street, said he too has mixed feelings — even though he and his family own the property and also are selling to Trammell Crow.

“There aren’t a lot of people doing this kind of business in downtown San Jose anymore,” Borch said.