San Jose is getting ready to put real money behind its talk of more housing downtown, with a plan to buy the Knox-Goodrich building in Fountain Alley, the stone-and-brick landmark built in 1889. Tomorrow, the City Council will weigh whether to acquire 26-36 South First Street and bring the long-quiet ground-floor storefronts back to life with cultural or commercial tenants. City staff say the deal is meant to help close the stubborn gap between paper approvals and actual construction on nearby projects.
Deal details
According to a staff memo from the City of San Jose, the city would pay $3.6 million for the two-parcel site. Of that, $975,000 would be held in escrow unless the seller submits a complete vertical building-permit application for the nearby Gifford project by December 31. That performance trigger is tied directly to a planned 276-unit residential project at 470 West San Carlos Street. The purchase is structured as an as-is acquisition, with the seller on the hook for closing costs and clearing any outstanding debts from the title.
Developer and timeline
Urban Catalyst lists Gifford as a 276-unit multifamily development and pitches it as part of a larger push to grow housing in downtown San Jose. The developer’s shift from senior housing to market-rate apartments has been chronicled by The Real Deal. City staff report that the Gifford team is aiming to wrap up permitting this year and start vertical construction in 2027, the milestone that controls whether the escrowed funds are released.
Why the city is paying more than appraisal
The memo notes that Urban Catalyst bought the Knox-Goodrich site in 2019 for $9.1 million, while a more recent Valbridge appraisal pegs the current value at about $2.78 million. Staff attribute that drop to broader market shifts since 2019. Even so, the city is prepared to pay a premium, arguing that the strategic acquisition could unlock new housing and bring back to life storefronts that have been vacant since development activity stalled during the pandemic. The Housing Department says it plans to seek development proposals and can roll out incentive tools, including production incentives and master-leasing of affordable units, to guide a project that hits both housing and placemaking goals.
What happens next
The purchase-and-sale agreement appears on tomorrow’s City Council agenda with budget language that would move $3.6 million from the Housing Project Reserve into a Property Acquisition account, as laid out in the council packet. If the council signs off, staff estimate escrow could close within 30 to 60 days of executing a purchase agreement. From there, the Housing Department intends to start outreach for development proposals, aiming to land a public-private project that can move into construction within three years. The memorandum also lists specific staff contacts and the follow-up steps the department plans to take if the deal proceeds.
Historic building and activation
The Knox-Goodrich building is a designated city landmark and is regularly cited in historic registers as an 1889 Romanesque Revival commercial structure linked to suffragist Sarah Knox-Goodrich. Local heritage documents highlight the sandstone facade and its protected status, and city officials say those features are expected to stay. The plan is to activate the ground floor with cultural-serving or commercial uses, while any future redevelopment proposals would be vetted to keep the historic elements intact and add housing above.
Bigger picture
City materials point out that San Jose has approved plenty of housing projects in recent years, yet a sizable share have not started construction, which leaves the city trailing state production targets. Buying key properties to nudge nearby developments into motion is one of several strategies staff are floating to shorten the trip from entitlement to shovel-ready. Observers caution that the real measure of success will be whether this kind of municipal intervention actually speeds up building in a tougher financing climate and a choppy office-to-residential market.
The City Council is set to take up the Knox-Goodrich item tomorow. If the deal is approved, staff say they will move quickly to solicit development proposals for the Fountain Alley parcels and start planning how to program the restored storefronts. We will keep an eye on council actions and subsequent filings as San Jose moves from purchase approval to potential redevelopment.
