By Meghan Hall
Arista Networks, a cloud-based networking platform, has widened its commercial real estate holdings. In a recent deal, the company purchased a Santa Clara research & development building for about $40 million, or $409 per square foot.
The Mercury News was the first to report on the deal.
The asset is located at 5200 Patrick Henry Dr. and totals 97,700 square feet. The property last traded hands in July of 2014, for $25.4 million, according to public records. The building was originally constructed in 1980.
Currently, Arista is headquartered at 5453 Great America Parkway, about a mile away. The company’s lease there is expected to expire in the next year, according to SEC filings. Its headquarters, which totals about 149,000 square feet, is part of Santa Clara Gateway, owned by the Irvine Company.
Both assets are near a number of other major companies, such as Dell Technologies, Johnson and Johnson and Comtel Systems Tech Inc. Levi’s Stadium, California’s Great America Amusement Park, and Mission College are also located nearby.
Silicon Valley’s R&D market is beginning to show more signs of promise after nearly a year of slow activity. At the end of the second quarter, the area’s vacancy rate evened out, finishing at 13.1 percent, up from 13 percent the previous quarter. This, according to a report released by Cushman & Wakefield, is a bright spot after nearly a year of “rapidly climbing” vacancy rates. Currently, about 22 million square feet of research and development space sits vacant.
Over the last year and half, rental rates have largely held steady, even as vacancy has risen. Rents during Q2 decreased just lightly by $0.03 per square foot to $2.85 per square foot on a monthly, triple-net basis.
On another positive note, deal velocity is beginning to pick up, with a number of major R&D sales closing in recent months. Westbrook Partners and Four Corners Properties sold the Rio Tech Park in North San Jose to Washington Holdings for $169.3 million, or $454 per square foot, while Peninsula Land & Capital purchased a portfolio of buildings at various locations for $142 million, or $242 per square foot. It is expected, moving forward, that the tech and life sciences industries will continue to bolster the R&D market in the long-term.