Huge project at old Bay Area mall changes focus as real estate shifts

Co-Author(s): George Avalos, Bay Area News Group

A vast redevelopment of the old Vallco Mall in Cupertino will shift gears in a fast-changing economy — a move intended to make the project more feasible and enable the first buildings to sprout by late 2024 or in 2025.

The Rise, as the ambitious mixed-use development is known, could bring about a new downtown for Cupertino that would emerge from the cleared-away remnants of the moribund Vallco Mall near the interchange of Interstate 280 and North Wolfe Road.

For that to become a reality, the project’s owner, an affiliate of busy Bay Area developer Sand Hill Property Co., proposed on Tuesday several key changes in the development — including more homes than before.

The latest version calls for 2,669 residences, an 11% increase over the approximately 2,400 homes that were previously envisioned.

The overall space involved in the project, including both residential and commercial, will shrink. The new version proposes 6.6 million square feet of total space, while the old version envisioned 7.5 million square feet of overall space. The commercial spaces also will have less square footage.

The amount of commercial space is being trimmed considerably.

The towers in the project will be significantly shorter and the development itself will be reconfigured to try to make it easier to coax lenders to provide construction financing for an array of properties that together could coalesce to create a new city center for Cupertino.

“Challenging market conditions of the past year have affected real estate projects throughout our region, and The Rise is no exception,” Reed Moulds, a managing director with Sand Hill Property, wrote in a letter to the Cupertino City Manager Pamela Wu.

Tech companies, alarmed by faltering revenue and profits, and seeking to be in the vanguard of the artificial intelligence revolution, have dramatically altered their priorities, chopped jobs and slashed their requirements for office space.

Complicating matters: the sharp rise in interest rates unleashed by Federal Reserve officials who are seeking to combat inflation. Higher interest rates, in turn, have made construction loans for real estate projects tough to find and costly when approved.

“These are challenging times for commercial real estate,” Moulds said in an interview with this news organization. “Economic conditions have caused some projects to be canceled and others to be postponed. The Rise is not immune from these market conditions.”

As an example of the changes, the prior version of the redevelopment proposal envisioned buildings with a combination of rental and for-sale housing in tall towers above ground-floor shops and restaurants.

The revamped plans envision rental housing in shorter buildings above ground-floor commercial space, or for-sale housing above the commercial spaces — but not a mixture of both.

The reconfiguration will also make it easier to build out the project in smaller phases, an approach that could pave a smoother path to construction financing.

“This is a more practical approach to making the project more feasible,” Moulds said.

Cupertino city staffers — but not the city’s Planning Commission or City Council — may decide on the proposal. Sand Hill Property believes its revamped proposal requires only approval by city administrators and not the policymakers on the council or commission.

The re-focused development is expected to resume preliminary construction in early 2024. Infrastructure improvements could be built next year. It’s even possible that the first vertical buildings could begin construction by the end of 2024 or sometime in 2025, according to Moulds.

“By itself, The Rise will fulfill over half of Cupertino’s overall Housing Element obligations and 90% of its low-income obligations,” Sand Hill Property stated in the letter to the city administration, referring to the state-mandated housing plans cities must craft.

Sand Hill believes the revamped plans for The Rise will also offer other benefits:

Ground-level open space will increase. The new plan offers more than seven acres of open space.

The proposal will create a walkable retail destination. The revamped proposal will keep the same number of retail storefronts, but the square footage will be decreased due to the removal of big-box retail spaces from the proposal.

“The Rise is designed to be a retail destination for the community with grocery, restaurants and shops, which will now be bolstered by a renewed focus on at-grade open spaces,” Sand Hill Property stated in the letter.

The overall project height and size will be reduced. Most of the towers will be 85 feet in height, and only very few towers will reach 240 feet in height.

Where height is necessary, those taller buildings will be concentrated along Wolfe Road and Interstate 280.

“This will be the vibrant downtown district that Cupertino has always wanted,” Moulds said in the interview. “This will create the housing that the community needs. This will produce the dynamic retail environment that we’ve craved in this city.”