No longer just Silicon Valley bedrooms
June, 2000

Just as San Jose grew out of being a bedroom community for the North County's technology industry, now the South County is developing a significant commercial and industrial base of its own, and the momentum will grow even stronger during the next several years.

From a historical perspective, the change has been dramatic. Only a few years ago, San Jose was having trouble attracting business to Edenvale, and Coyote Valley, where the historical Grange Hall is the most prominent landmark, was considered suitable primarily for grazing with no viable plan to balance growth with open space preserves. Morgan Hill was a small town around which executive homes had been growing, but with only a modest jobs base. Gilroy based its economy on food processing and was only just beginning to see the full potential of the garlic brand. Monterey Road was finally supplemented by a freeway bypass, but it was still a disheartening drive to Cupertino or Palo Alto.

Today, Edenvale is one of the most active technology-based real estate markets in the county, currently courting more than 2,000,000 square feet of deals that will virtually build out Edenvale. By the middle of this year, the north Coyote Valley will have City approval to emerge as the Silicon Valley's largest research park, anchored by the world's second most valuable company, Cisco Systems.

Morgan Hill has 1 million square feet of commercial/industrial development either under construction or recently completed in Cochrane Road's existing three business parks; the Morgan Hill Ranch, Cochrane Business Ranch, and Sutter Business Park. More than 30 companies have either expanded or relocated to Cochrane Road with the most significant being Abbott Laboratories. This build out will more than double over the next five years with the addition of the new Madrone Business Park that will be home to the Media Arts Group's 300,000-square-foot headquarters and production facility. While Morgan Hill's population has grown from 33,800 to 39,300 in the past five years, jobs have been growing more than twice as fast. Nearly 1,000 jobs were added along Cochrane Road in the past two years alone.

While preserving its small town character, Morgan Hill nevertheless has built a community firmly balanced between a service-consuming residential sector and a tax-producing commercial one.

Now Gilroy is experiencing the growth of executive housing that is likely to draw business investment in the same manner as occurred in Morgan Hill. About 150 homes have been built or are under construction west of Santa Teresa Boulevard in Eagle Ridge, a community of ultimately 850 homes centered on a Johnny Miller golf course.

Gilroy's most remarkable achievement, of course, has been retail. While the population grew from 35,300 to 40,500 from 1996 to 1999, retail sales grew from $595 million to $859 million. People from Watsonville and Hollister in the south and San Jose and beyond to the north visit Gilroy for the factory outlets, then pick up items from the other national retailers who have located there.

The nucleus of the Silicon Valley is migrating south and here's why .....

1. The growth of the Silicon Valley Economy. The Internet Revolution has propelled the Valley into a growth cycle that cannot be accommodated in the historical confines of the "Golden Triangle".

2. Access and Transportation. Completion of Highway 85 opened up the South County not only to the midsection of Silicon Valley, but also to its roots on the lower and mid-Peninsula. Continuing highway improvements such as the widening of 101 to six lanes (opening in 2004) and eventually to eight lanes will keep the South Valley accessible. Commuter rail is also being developed from San Benito County north.

3. A Diverse Housing Base within a reasonable commute distance. Consider that the 101/Cochrane Road interchange is within 30 minutes of Gilroy, Salinas, Hollister and parts of San Benito County where housing is available and relatively affordable.

4. Government Policy. When you combine the efforts of County Supervisor Don Gages' emphasis on the expansion of Highway 101, the San Jose City Council's willingness to accommodate Cisco in the Coyote Valley, and Morgan Hill's emphasis on business growth and a balanced community, what do you get? Effective regional planning.

5. Cost Advantage. Industrial land costs $10 to $15 a square foot in Morgan Hill, versus, if you can find it, $25 plus in North San Jose, while the frenzy on the Peninsula has made prices a moving target.

The South County offers high quality industrial locations and facilities close to the heart of Silicon Valley for business purposes yet far enough removed so a high quality of life is still affordable. Community leaders are determined to keep it that way by managing growth.

Over the next few years, Cisco Systems and other employers are expected to build out the Coyote Valley, providing tens of thousands of jobs and a property tax base for local schools and other services equal to those on the Peninsula. Some 5,000 homes also are planned for Coyote Valley.

Morgan Hill expects to have 43,000 residents by 2005, and will continue to provide zoning and entitlements so its jobs base will grow somewhat faster. Gilroy will continue to limit new homes to 400 each year, while encouraging development of office/R&D.

Economic development will drive personal income. Just under 140,000 people live in the Highway 101 Corridor from Coyote south to Hollister, and the mean annual household income is approaching $85,000. By 2003, the population is projected to be 147,500, and household income $87,900.

Providing jobs as well as housing in the South County will decrease commuting distances, create balanced communities and enhance the area's high quality of life. After years of effort, community leaders are successfully meeting their economic development goals. We expect them to be as tireless, creative and successful in meeting the challenges that accompany growth.

San Jose-based Toeniskoetter & Breeding, Inc. Development has completed the 30-acre, 360,000-square-foot Cochrane Business Ranch in Morgan Hill. In association with The Berg Group and Mission West Properties, it is developing the adjacent 110-acre, 1.5-million-square-foot Madrone Business Park.