Hines buys Silicon Valley office campus

Hines, a global real estate firm, has purchased the Clearview Business Park, a 380,000-square-foot, six building office campus in San Mateo, Calif.

Financials on the deal were not disclosed; however, The Registry reported the sales price was estimated to be $217 million.

The seller in the deal was Deutsche Asset & Wealth Management, which paid $125.5 million for the property in 2014.

“Clearview Business Park is a high-quality asset in a strategic location,” said Cameron Falconer, Hines senior managing director.

The property is fully leased to Tesla and GoPro.

Due to the Bay Area reaching full employment levels, companies have been expanding at other locations in the U.S. where hiring has not yet been an issue, causing the San Jose metropolitan statistical area employment growth to slow down, according to Cushman & Wakefield.

Another factor for the slowdown is the ramping up of mergers and acquisition activity resulting in a cutback in the number of jobs needed at the combined companies. All that said, when possible, tech companies generally prefer to expand in the region due to the depth of talent here. That is certainly reflected in the unemployment rate for the San Jose MSA, which declined 40 basis points (bps) year-over-year to 3.1 percent from 3.5 percent, well below the national figure of 4.1 percent.

After rising for three consecutive quarters, Silicon Valley’s office vacancy rate decreased during the first quarter of 2018, closing at 9.8 percent, down 130 bps from 11.1 percent in the fourth quarter of 2017. Although vacancy dropped in the first quarter, the percentage of available sublease space climbed to 32.1 percent of all available space, up from a figure of 30.1 percent in the fourth quarter and well above the 10-year average of 14 percent.

All of the noteworthy recent leasing transactions were either new deals or expansions with only one renewal in the bunch. The largest deal of the quarter was a pre-lease by Facebook at Moffett Towers II (three buildings totaling 1.1 million square feet) in Sunnyvale. After leasing the first building at Menlo Gateway last year, Facebook expanded into the to-be-built balance of the project totaling 495,000 square feet, also in Menlo Park. Meanwhile, Analog Devices leased two buildings at Santa Clara Square (440,000 square feet). This leaves only one multi-tenant building and some sublease space available at this project, which totals 1.1 million square feet and was completed in 2017.

Demand is healthy for class A product and major employers continue to increase their R&D spend. Cushman & Wakefield is currently tracking 11.3 million square feet of active office/R&D tenant requirements in the Silicon Valley, which is up from 9.9 million square feet in the fourth quarter 2017. Rent growth, however, may flatten across the Valley thanks to lower-priced sublease inventory along with competitive new speculative product coming online.

JLL predicts several large tenants are rumored to be circling, while mid-sized, full floor tenants are trading up for nicer space. Average asking rents will stay stable for the first half of 2018, but the resurgence of large leasing activity could push rents past 2017 levels before year-end.