With office and residential space in San Francisco and Silicon Valley becoming scarcer by the day, the East Bay city of Fremont, Calif., is girding for some spillover.
Last week, Lennar Corp. completed a deal to buy a 111-acre chunk of a former car-manufacturing plant in Fremont, 30 miles southeast of San Francisco, where it plans a dense mix of 2,200 apartments and houses, research-and-development space and offices, all centered around a new station for the commuter rail that leads to San Francisco.
The move by Lennar, along with a handful of other developers that have bought smaller parcels nearby, appears to be a bet that the former manufacturing area can be transformed into a thriving downtown-like environment that feeds in part off the expansion of Tesla Motors, which owns a factory adjacent to Lennar’s parcel.
“This is a highly desirable site,” said Gordon Jones, Lennar’s Bay Area division president. “It’s in a constrained housing market in proximity to well-paying jobs and easy access to transit.”
The plans in Fremont show how communities and investors throughout the Bay Area are trying to capitalize on the rapid growth that has so far been concentrated in San Francisco and cities to the south in Silicon Valley. With traffic and other congestion concerns mounting in those communities, cities in the East Bay have high hopes.
“We’re looking forward to seeing some of that growth come to this side of the bay,” said Jessica von Borck, Fremont’s assistant city manager.
Other East Bay cities are seeing new development as well. The University of California, Berkeley is planning a campus with some private investment in the suburb of Richmond, in the northern reaches of the East Bay. In San Ramon to the east, the owner of the giant office park Bishop Ranch is planning a large, dense mixed-use expansion.
And in Santa Clara, in the southern reaches of Silicon Valley, Related Cos. is planning a multibillion-dollar mixed-use development meant to attract expanding companies looking for modern office space.
Of course, it is far from clear that lots of businesses will flock to any of these developments, let alone all of them. Despite the growth of the tech sector, the East Bay has long struggled to attract top businesses to expand or move, and historically it has more been a hub of back-office jobs and manufacturing, due in part to its distance from wealthy suburbs north and south of San Francisco.
In addition, the entire Bay Area is known for its booms and busts, and today’s boom surely isn’t going to continue forever.
For Fremont, the deal by Lennar represents the culmination a planning effort and push that started in 2010, after a giant auto plant jointly owned by Toyota Motor Corp. and General Motors Co. closed.
The car makers sold part of the facility to Tesla, and then sold a parcel to railroad Union Pacific Corp., which planned to use it as a rail yard.
But that vision was at odds with that of city planners, who saw the plant’s closure as an opportunity to bring new development and attract new employers.
So a set of city officials flew out to Omaha, Neb., to lobby the chief executive of Union Pacific on their vision, Ms. von Borck said. The land could be more valuable with other uses, the officials said, particularly given that the Bay Area Rapid Transit rail was being extended and Tesla’s popularity was growing.
Shortly thereafter, Union Pacific shifted course and put the land up for sale, settling on Lennar as a buyer. Lennar then crafted a plan, received city approvals and completed the deal last week. The price wasn’t disclosed, but Union Pacific said in a statement it would recognize a gain of $110 million on the deal.
For Lennar, the purchase adds to its portfolio of large-scale projects in the Bay Area.
It is seeking to build two giant housing developments in San Francisco—one on an island between San Francisco and Oakland and the other in a former shipyard.
Lennar’s Mr. Jones said the company’s interest in the region comes as “the Bay Area combines an extremely robust job market with a tight housing market—creating significant opportunity for home builders.”
Like the two projects in San Francisco, the Fremont development has considerable upfront infrastructure costs. Lennar is expected to spend up to $100 million on infrastructure including roads, open space and a school. Lennar plans to spend about $1
billion on the residential portions of the project, while it plans to sell off the commercial sites to other developers.
That initial investment is slated to start as soon as this summer, according to Fremont’s Ms. von Borck, with the total build-out expected to happen over 15 years. For now, demand appears strong.
“We happen to be at a really good spot in the market,” she said.
