By Nancy Amdur
Google Inc. will soon add another Silicon Valley property into its thickening real estate portfolio as it works to complete the purchase of a 400,000-sqaure-foot office park in Mountain View.
The company reportedly will pay $250 million, or about $625 per square foot, for the property at 700 E. Middlefield Road, according to sources with knowledge of the transaction. The price would be top dollar for the market, and the deal, which is not yet closed, shows Google’s “commitment to Silicon Valley,” said David Schmidt, a senior vice president with commercial real estate company Colliers International in San Jose.
New York-based Deutsche Asset & Wealth Management, formerly known as RREEF, owns the 24-acre property. The campus is now home to Synopsys Inc., an electronic design automation company, which plans to relocate across the street at 690 E. Middlefield Road when its lease ends next year.
Google’s reported purchase price would far exceed the average sale price for office space in Mountain View at roughly “two times the market,” Schmidt said.
However, the price is not necessarily indicative of what an investor would pay. The campus is likely more valuable to Mountain View-based Google than to other potential buyers as it gives the rapidly growing technology giant another spot to expand around its headquarters, real estate industry experts said.
“They’re growing and want the flexibility to grow” near their home base, said an industry source not directly related to the deal. “It’s a fabulous location.”
“It’s the Google effect. They can step up and pay what they want,” Schmidt said. Scarce inventory of similar office space in the area makes the property even more attractive. “Where can you find 24 acres in Mountain View? It’s a gem,” he added.
Deutsche has been working with San Mateo-based Sares Regis Group of Northern California since 2012 to create a redevelopment plan for the property. Blueprints call for razing the four existing buildings, built in the 1980s, to create a 1 million-square-foot campus. The new campus would comprise four office buildings five to eight stories high and a 10,000-square-foot retail building. It also would provide 3,118 parking spaces for the offices and another 55 spaces for retailers’ use, according to a memo released last month by the City of Mountain View. Deutsche and Sares Regis did not return calls for comment.
An Environmental Impact Report is being created for that proposal, said Scott Plambaeck,a senior planner for the City of Mountain View. The city has not been notified of a change in plans or ownership, he added, so the schedule remains on track to hold a public hearing on the redevelopment at the end of this year or early next year.
Traffic studies will be part of the report as Mountain View recently has experienced “quite a bit of growth,” Plambaeck said. Office vacancy in Mountain View is 5.9 percent, according to a first quarter 2014 report by Cassidy Turley Commercial Real Estate Services.
Google added more than 1 million square feet of office space in Silicon Valley in 2013, according to research by Cassidy Turley. Google holds a ground lease to build a 1-million-square-foot campus on 42 acres at Moffett Federal Field near Mountain View, and in February inked a lease agreement for another 1,100 acres at the airfield. Also among Google’s acquisitions over the past year are two properties in Palo Alto, including a 22,300-square-foot office/R&D building at 1010 Corporation Way and a 200,000-square-foot office park on East Meadow Circle.