By Meghan Hall
As the Bay Area’s companies worked their way out of Silicon Valley and down the Peninsula, North San Jose has become a hub for commercial real estate activity. Office assets in North San Jose, particularly those with value-add opportunities, are quickly snapped up by both domestic and international investors such as Chinese Developer GZI North First. The real estate firm has purchased an office building at 2665 N. First St. for $41 million, or about $315 per square foot, according to Santa Clara County public records and brokerage firm NKF Capital Markets, which worked on the deal.
The seller, New York City-based New York Life Real Estate Investors, bought the property back in 2015, and paid $30.3 million, or $233 per square foot for the property at the time. New York Life Real Estate Investors acquired the property in a venture through its operating partner, San Rafael-based Seagate Properties.
GZI North First — known fully as Guandong Zhonghuan Investment Group — also received a $26 million loan from Industrial and Commercial Bank of China to finance the purchase of the property. Founded in 1993, the firm invests in the high-tech industry, as well as science and technology business parks and general real estate development. According to the firm’s website, GZI North First currently has about 10 million square feet of projects under construction. Its investment arm, Onelin Investment Inc., is in the planning and permitting phases of over $400 million worth of new development in the United States. The firm has several projects underway, including two in the Seattle region, where its U.S. office is located, and one condominium project called Ori San Leandro in the Bay Area.
According to CBRE’s website, the 130,000 square foot building, which was originally constructed in 1985, has undergone about $2 million worth of renovations to update the entries, landscaping and lobby within the past five years. The property has both indoor and outdoor collaborative areas, floor to ceiling windows and fiber-optics for advanced network and telecom services.
With the acquisition, GZI North First has joined a slew of regional, domestic and international companies investing in North San Jose along First Ave. Hana Asset Management, a South Korean firm, and Ocean West Capital paid $132.5 million, or $530 per square foot, in June 2018 for the North First Commons office/R&D complex, currently 100 percent leased by E-Bay. In October 2018, Google bought two buildings — 4300 N. First St. and 4400 N. First St. — for $154.5 million, or about $410 per square foot.
NKF Capital Markets Vice Chairman Steven Golubchik, Executive Managing Director Edmund Najera, Senior Managing Director Tyler Meyerdirk, and Associate Director Darren Hollak represented seller New York Life Investors, LLC along with its partner Seagate Properties in the transaction to the buyer, a joint venture owned by Onelin Investment Inc. and SVTC + Constellar Ventures.
“2665 North First Street received substantial interest driven largely by the diminishing supply of multi-tenant office product in the North First corridor of San Jose” said Najera.
The property is prominently located along North First Street in San Jose, providing tenants with convenient access to vehicular and public transit, including a VTA stop directly in front of the property. This highly desirable location is surrounded by some of the world’s leading tech companies including Google, Apple, Samsung and Microsoft.
As a whole, San Jose’s office vacancy rate in the fourth quarter of 2018 was around 10.7 percent, higher than several other cities such as Mountain View and Palo Alto, whose vacancy rates were 1.6 and 4.7 percent, respectively, according to Avison Young. Cupertino had the lowest vacancy rate at 0.5 percent, while Los Gatos and Saratoga’s combined office vacancy rate was slightly higher, at 2.6 percent. With higher vacancy rates at their disposal in North San Jose, local companies will have more opportunities to expand and grow.