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

CUPERTINO — A vast redevelopment of the old Vallco Mall in Cupertino will shift gears in a fast-changing economy — a move crafted 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. 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. The towers in the project will be considerably shorter and the development itself will be reconfigured 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 typical new version of the buildings in the revamped plans envision rental housing in shorter buildings above the ground-floor commercial, 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 also 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 — are being asked to decide on the project. 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.

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