Applied Materials Continues Silicon Valley Buying Binge, Spends $46.6MM on Sunnyvale R&D Asset

By Meghan Hall

Applied Materials’ Bay Area expansion has occurred at a rapid pace, and post pandemic the engineering solutions firm has worked to grow its real estate holdings in a significant way. In recent weeks, Applied Materials has closed on multiple transactions, the latest for 545 Oakmead in Sunnyvale. According to industry sources, Applied Materials paid $46.6 million, or about $405 per square foot, for the property.

The seller of the property was affiliated with New York-based Ascent Real Estate Advisors, according to public documents. Ascent originally purchased the asset in November of 2015 for $27.5 million, or about $239 per square foot. Documents also indicate that the 545 Oakmead totals about 115,000 square feet and sits on 6.6 acres of property. The single-story building was originally constructed in 1977.

545 Oakmead is also just off of Highway 101 and the Lawrence Expressway. A retail center anchored by an AMC Theater and Krispy Kreme, as well as a Walmart and Panera, are also nearby.

The transaction closed the same day that Applied Materials purchased two other Sunnyvale research and development buildings at 955 and 965 E. Arques. The two buildings total 89,273 square feet and traded for $34.4 million, ro about $384 per square foot. The sellers of the properties were Graymark Capital and Ascent Real Estate Advisors. 

CBRE’s Scott Prosser, Joe Moriarty, Russell Ingrum and Jack DePuy represented Ascent and Graymark in the transaction.

“Applied Materials, a top-tier owner-user in the market, was seeking to expand their Silicon Valley campus and was drawn to these institutional-quality, strategically located buildings,” said Prosser of the Arques transaction.

In recent months, net absorption for research and development space in Silicon Valley continues to decrease, but lease rates remain relatively steady. According to recent research released by Kidder Mathews, asking rates rose 5.34 percent year-over-year from $2.62 per square foot triple net during Q1 of 2020 to $2.76 per square foot triple net during the first quarter of 2021.

Net absorption, however, dropped to a negative 963,209 square feet during the first quarter of 2021. Four of the past five quarters have seen negative net absorption, and over two million square feet of negative net absorption has been recorded since the beginning of 2020. As a result, the vacancy rate has increased 22.7 percent year-over-year, from 8.7 percent to 10.67 percent at the end of Q1 2021.

Buildings with more industrial and warehouse space, as well as access to heavy power are seeing the most demand. The life sciences industry is also fueling the sector, and investors are still keen to get their hands on available assets. In recent months, Hines purchased 5301 Patrick Henry Drive in Santa Clara for $68 million, or about $526 per square foot. In another transaction, Equus Capital Partners sold 2710-2855 Bowers Ave. to GI Partners for $41.5 million, or just under $390 per square foot.

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