(silicon valley business journal) lincoln property co. has teamed up with one of the largest developers in china to bring a north san jose office proposal to life.
lincoln and capital partner gemdale corp. acquired about 21.5 acres of land that's fully approved for four new office buildings totaling up to 415,000 square feet. it's the latest big office play in the city's north end, which has seen a flurry of development and leasing activity in the last couple of years. the deal closed this week, and construction is expected to begin in the second quarter of this year.
"one of the attractive attributes here is the critical mass," said , executive vice president of lincoln property co. "to have 415,000 square feet is a strong attribute. to a tenant — and there are tenants that have that such requirements — there are only so many alternatives."
the property is located along nortech parkway just off north first street in the city's alviso district. if that location sounds familiar, it should: it's adjacent to a new manufacturing campus that's currently being built out by trammell crow co. and principal real estate investors, .
trammell and principal were the sellers of the office land, which sources tell me went for about $30 per dirt foot, or roughly $28.1 million. (to be clear, trammell and principal are retaining the manufacturing piece.)
"it provides the same workplace environment and nice 40,000-square-foot floor plates, which are important to today’s customer," said , an executive vice president who is marketing the project with cbre colleague . "you've got dedicated amenities for each building and it's right off the freeway. so at two to three stories, you get a freestanding building and all the identity, versus being a minority tenant in a eight-story building."
shannon and benevento also represented the buyer. trammell and principal were represented by shannon and .
the project marks marks another example of chinese equity finding a place to land in silicon valley. gemdale, based in shenzhen and listed on the hong kong stock exchange, says it's built tens of thousands of condos in china and has in recent years focused on international expansion.
gemdale is also lincoln property co.'s partner on two projects in san francisco: a 19-story office tower at 350 bush st., and a five-story office and retail project at 500 pine street. in hollywood, gemdale is building a six-story residential and retail complex near sunset boulevard.
"they’re a world-class development company looking to grow in the u.s.," herr said. "they, like us, understand the importance of technology. and they’ve studied the silicon valley and fully believe in this product and the kind of tenants that will ultimately lease it."
chinese investors have been jumping in with both feet to the region's development scene. an affiliate of guangzhou r&f properties is building a condo tower in downtown san jose; china new era is the investor behind insight realty's museum place proposal, also in downtown san jose. genzon property group is working with h&q asia pacific on burlingame point, a major office campus on the peninsula.
still, the project comes at an interesting time in the region's real estate market. while broker and developer sentiment remains strong, there is increasing skittishness that a worldwide economic slowdown and localized venture capital pullback could sap job growth — and office demand. some formerly high-flying tech superstars, such as yelp, vmware, emc, and evernote, are already pulling back.
but herr said the fundamentals are still good, and the midpoint location is well positioned to capture tenant demand.
"it’s always been an integral part of silicon valley, north san jose," he said "it’s really a function of supply and demand. it remains high, and there’s no supply available for the most part in sunnyvale and mountain view. and less supply available in santa clara. by definition, demand is going to get met wherever you can supply it."
herr said lincoln is looking for more projects in silicon valley. lincoln's history is long here, but it has not been active in silicon valley in some time. the company is active in multifamily, office and industrial nationwide, and works with a variety of institutional money partners.
"we continue to look for opportunities in all of the above," herr said. "but we’re excited to be starting this development, it’s an important one for us."
herr said that the project should be delivered in the third quarter of 2017. a general contractor hasn't been named.
nathan donato-weinstein covers commercial real estate and transportation for the silicon valley business journal.