Owners ask top dollar for buildings along stretch of Monterey,
some of which are boarded up and rundown
Gilroy – A number of them are boarded up and several may have to be torn down, but that hasn’t stopped owners of downtown buildings from demanding top dollar for their property.
Some market observers see spiraling prices as a natural outcome of the area’s revitalization; others say building owners need a “reality check.”
A sample of property listings show soaring real estate prices along a two-block stretch of Monterey Street – between Fourth and Sixth streets – that have the highest concentration of businesses.
A boarded-up building at 7525 Monterey St., once the home of Orofino Jewelry, is listed at $498,000 – or $142 per square foot. One year ago, the city paid $300,000, or $42 per square foot, for a property just two blocks south as part of land acquisitions for a future arts center.
Downtown developer Gary Walton said “it’s a crazy market right now,” pointing out that commercial real estate prices have increased in recent years almost as fast as housing prices. Walton purchased a downtown building eight years ago for $30 a square foot, and sold it 18 months ago for $100 per square foot. But he believes some listing prices by downtown building owners are simply wishful thinking.
“Current rents won’t support those prices,” he said. “You can ask whatever you want.”
Casey Dang, a real estate agent looking to sell the office space at 7542 Monterey St., also has his doubts. Only one offer has come in on the $1.1-million property, located just north of a future health clinic, but “it wasn’t close enough,” according to Dang, who listed it in July.
“At that time, the price was reasonable,” he said. “But now, it would need to be reduced. Times have changed … I’m hoping to have another discussion with the seller and maybe review the price, to have a reality check against the atmosphere.”
Others in the area have had more luck fetching high prices. Lynn Tran, representative for the boarded up jewelry store at 7525 Monterey St., said she planned to sign a contract with a buyer Wednesday night. She would not disclose the sale price, but said she has had a “high level of interest” in the property, listed at $498,000.
“If I had the money, I’d buy it,” she said.
The momentum of downtown development has fueled some of the spike in prices and interest, according to Walton and other market observers.
In the last two years, dozens of applications to build commercial and residential projects in the city’s historic core have streamed into City Hall. To maintain that momentum, city leaders have decided to continue a program that frees developers from paying any building fees for downtown construction.
Mayor Al Pinheiro proposed extending the program to benefit a specific group – those whose buildings are tagged as earthquake hazards. Pinheiro has made a crusade of convincing those owners to sign up for a city program that finances engineering assessments of buildings. Those studies will determine if owners must repair or demolish their buildings.
Pinheiro said he has no qualms leading the fight to condemn unsafe structures if owners attempt to put off costly repairs while holding out for high bidders.
“There is no question in my mind that if revitalization of downtown is going to happen, we need to have the owners buy in,” he said of the city’s program to assess building safety. “If you’re greedy, it’s not going to be a good thing. Obviously not everybody’s going to pay the prices that are being asked. All I’m asking is for people with buildings downtown to be part of the solution.”
Gary Tilbury, a Realtor with Intero Real Estate Services in San Jose, said prices in downtown Gilroy and other areas will remain high if the overall economy continues to improve and jobs keep trickling back to Silicon Valley.
“These (properties) seem kind of inflated for downtown Gilroy,” he said. “But that doesn’t mean the buyers won’t pay the price.”