Commercial Real Estate in San Jose: Urban Villages, Downtown Districts and the Measure E Transfer Tax

By Matthew Martinez, Founder, CEO & Managing Broker, Diamond Real Estate Group. California DRE #01869679.

San Jose is the largest commercial market in Santa Clara County, and its zoning code sorts that property into five families: ordinary commercial districts along arterials, industrial and employment districts in North San Jose and along the freeways, Urban Village and mixed-use districts that carry the city’s growth strategy, the downtown districts, and planned developments. The other thing that sets San Jose apart for a buyer is the stack of local transfer taxes, which can change closing costs on a larger asset more than any zoning detail. Confirm the zoning, overlays and tax treatment for any parcel with the City of San Jose Planning Division and your escrow officer.

Who controls the parcel

Inside city limits, Title 20 of the San Jose Municipal Code governs land use. Its 26 chapters cover base districts, overlays, the downtown, specific height limits, parking and transportation demand management, and separate rules for commercial and industrial condominiums. San Jose still surrounds a number of unincorporated County islands, where County zoning applies until annexation; our Santa Clara County commercial guide explains how those pockets work. Check the city limit line on the address before you assume city rules apply, because the two codes differ on uses, fees and taxes.

San Jose zoning for commercial, industrial and mixed use

Urban Villages, employment lands and the downtown core

Urban Villages. Chapter 20.55, adopted by Ordinance 30603, sets six districts that each carry out a General Plan designation. The Urban Village Commercial district is the one to watch as an investor: it is commercial-only, so a buyer hoping to add apartments on a UVC site will need a rezoning. The Urban Village, Mixed Use Commercial and Mixed Use Neighborhood districts pair commercial space with housing, and two residential districts in the same chapter, Urban Residential and Transit Residential, push density toward transit. The code lets the mixed-use and residential districts be applied to sites outside the designated villages as well.

Employment lands. The industrial chapter is written to protect jobs land. Industrial Park is described as an exclusive industrial designation, Light Industrial and Heavy Industrial allow only incidental retail for nearby businesses and workers, and warehouse retail is allowed only where it will not constrain future industrial use. The Transit Employment Center district is the most intensive, aimed at buildings of four stories or more near transit, with retail suited to the first two floors and support for hotels of at least 200 rooms.

Downtown. Chapter 20.70 applies only inside the downtown zoning area, roughly bounded by Julian Street, Fourth and Seventh streets, Interstate 280, the Union Pacific line, Stockton Avenue and Coleman Avenue. It governs the DC and DC-NT1 districts and maps a Ground Floor Active Use Area overlay over part of the core. Ordinance 30857, adopted January 10, 2023, repealed the downtown off-street parking requirements, though loading and bicycle parking rules remain. The chapter also includes a separate part for Downtown West.

Other San Jose rules that shape a deal

• Commercial linkage fee. Chapter 5.11 is the city’s commercial linkage fee chapter, tied to new nonresidential space; we did not read its terms, so get the current applicability and rate from the Housing Department before pricing a development site.
• Height limits. Chapter 20.85 sets specific height restrictions, and much of the city sits under the San Jose airport’s flight paths; we did not review that chapter, so confirm limits for tall projects with Planning.
• Commercial condominiums. Chapter 20.175 regulates commercial and industrial common interest developments, which matters if you plan to sell office or flex units separately.
• Planned developments. Many shopping centers and campuses carry PD zoning under Chapter 20.60, where the PD permit, not the base table, sets the uses.

Transfer tax, business tax and property tax

San Jose layers three city taxes on top of the County’s.

• County documentary transfer tax. Chapter III of the County’s taxation division, dating to Ordinance NS-215 of 1967, charges $0.55 per $500 of consideration, excluding assumed liens, and credits a conforming city tax set at half that rate.
• City real property transfer tax. Chapter 4.62 sets $0.275 per $500, administered by the County Recorder. Under the County’s credit rule, that half rate is shared within the $0.55 rather than added.
• Real property conveyance tax. Chapter 4.58 adds $1.65 per $500, collected by the city’s Director of Finance, with both buyer and seller jointly liable.
• Measure E. Voters approved Measure E on March 3, 2020, adding Chapter 4.59, operative July 1, 2020. It charges 0.75% on transfers from $2 million to $5 million, 1.0% above $5 million to $10 million and 1.5% above $10 million, each applied to the whole price. The $2 million threshold can adjust for inflation every five years starting July 1, 2025, so confirm the current threshold. The city’s Measure E page explains that the revenue is general fund money that council policy directs mainly to affordable housing and homelessness programs.

Who pays each tax is a negotiated term, so write it into the purchase agreement. San Jose also levies a business tax under Chapter 4.76 and a transient occupancy tax under Chapter 4.72; we did not verify their rates. A change of ownership generally triggers Proposition 13 reassessment.

Due diligence that matters in San Jose

Start with our commercial due diligence checklist, then add:

• Confirm city or County jurisdiction, especially near unincorporated islands.
• Check whether the parcel is base-zoned or under a PD permit, and read the permit.
• On industrial land, confirm the proposed use is allowed in IP, LI or HI rather than assuming commercial uses carry over.
• Price Measure E and the conveyance tax into the deal at the actual sale price tier.
• For downtown sites, check the Ground Floor Active Use overlay and loading rules.
• For new space, ask for commercial linkage fee and airport height reviews.

Questions people ask

Sources & notes

1. San Jose Title 20, Zoning (GoCodebook)
2. Chapter 20.40, Commercial districts, Part 1
3. Chapter 20.50, Industrial districts, Part 1
4. Chapter 20.55, Urban Village and Mixed Use districts, Part 1
5. Chapter 20.70, Downtown zoning
6. Chapter 4.59, Measure E transfer tax
7. Chapter 4.58, Real property conveyance tax
8. Chapter 4.62, Real property transfer tax
9. City of San Jose, Measure E page
10. Santa Clara County Ordinance Code, real property transfer tax
11. Chapter 5.11, Commercial Linkage Fee

Note: We did not review the use tables or height standards in each chapter, Chapter 20.85 (height), the business tax or TOT rates, or the current inflation-adjusted Measure E threshold.

This page is general information, not legal or tax advice. Last reviewed October 2026 by Matthew Martinez.

Related: San Jose real estate guide · Multifamily property in San Jose · Commercial real estate services