When most people think of Pulte Homes, suburbs and tract housing usually come to mind. Well then, what's one of the nation's largest builders doing in the urban heart of such Northern California cities as San Jose, Emeryville, and Hayward?

Thriving, as it turns out. It's not that the big Bloomfield Hills, Mich.-based builder is spurning its bread-and-butter market. Far from it. Rather, it's part of Pulte's strategy to make the most of local market demands. And like a growing number of markets, the San Francisco Bay Area is one of those places Will Rogers was talking about when he advised people to buy land 'cause they weren't making any more of it.

"It's not like there's more land at the edge to develop more single-family houses," says a pragmatic John Johnson, vice president of land for Pulte's Northern California division. "Many places in our area are built-out. Where one city ends here, another begins, so it would be difficult to achieve a business plan that's totally dependent on single-family tract house. And let me remind you that we are a for-profit company."

So in the never ending quest to find places to build, Pulte has turned inward, where cities are actually encouraging growth instead of fighting it. And, as Pulte has discovered, where the powers that be are willing to work with builders and developers rather than against them.

It's just easier to go where land planners and zoning boards want you to go than it is to fight city hall so you can go where you want, Johnson says.

"The government doesn't give us things like special financing -- this is a private redevelopment activity, we use all our own capital -- but it works hard to work with us," the Pulte executive says. "Most of the time when we need a change in zoning, government officials move us along through the entitlement process as quickly as they can."

"High Urban" Sites

The company has seven urban properties under its belt or under way and several more are in the planning stages. Though they are literally all over the map, they have one thing in common: They all are built on "high urban," or what have been mostly downtown, commercial-use sites in "close-in Bay Area cities" where the original properties have lost their economic vitality and are no longer producing the income streams they once did. Yet they have two major assets: The infrastructure is already in place and jobs are close by.

"We've torn down everything from shopping centers to office buildings," says Johnson. "There is a wide variety of sites available with all different kinds of buildings on them. But they all have utilities, sewer, and water in place."

Pulte's most recent urban property is Liquid Sugar, a 55-unit property in Emeryville just across the street from two very large commercial developments full of young engineers earning very good salaries. The project, which was designed by the architectural firm of Kava Massih, takes its name from the old sugar mill which once stood there. Already sold out, the flats went for $255,500, while the lofts, some of which offer views of the San Francisco Bay Bridge, started in the $330s and the townhouses were priced from the $400s.

Next up for the company is Mariani Square in the Japantown area of San Jose. Before the property became outmoded, it was a cannery and processing plant operated by Del Monte and then became part of the Mariani Fruits & Nuts empire. To serve as a link to the past, rooflines will be retained, as will a water tower. But otherwise, the 114 row houses and 45 loft units (priced from the $400,000s) will be packed into the renovated brick and timber buildings, which are just four blocks from a light rail station for an easy commute to San Francisco.

Slower But Faster

Because they are invariably more complicated, urban properties take a little longer to build than the typical single-family development. Johnson estimates the construction cycle often takes six to eight months or more before sales can actually be closed and buyers can start moving in. But since it doesn't take nearly as long to secure the necessary government approvals, it can be as quick as 24 months from the time work is started on a project until it is sold out. When you compare that to the eons it seems to take to get a more typical Pulte property through the pipeline, especially in California, two years is lightening fast, the company official says.

The downside, of course, is as with any redevelopment project, it is difficult to control costs. Also, there is often an environmental cost to clean up a site that's hard to estimate.

Then there's the marketing risk. But that's really no different than with any new project. Besides, Pulte doesn't go unknowingly into the urban abyss, at least not when it comes to understanding its market.

"What makes this all work is 'market segmentation,' " Johnson explains. "We know going in that there is a customer for this product. Before we start, we know how many customers there are, where they are, and what they want. And we know what they are willing to pay."

More Coming

With demand for urban properties far exceeding the company's expectations, Johnson says his division is "very excited about doing this kind of product. We see it as a very substantial part of our business in the Bay Area."

So, apparently, does the rest of the country. Other divisions have made pilgrimages to see what the Northern California division is doing. And new CEO Richard Dugas is on record as saying there are these kinds of opportunities in almost all the markets where Pulte is active.

"You don't build this stuff out in the suburbs," Johnson says. "It is the kind of housing that is right for urban settings, and you are going to [see] us building a lot more of it."

Learn more about markets featured in this article: San Francisco, CA.