By Nancy AmdurBoston-based real estate private equity firm Rockpoint Group LLC recently padded its Bay Area portfolio by purchasing the three-building BayCenter office campus along the Highway 92 corridor in San Mateo.
Equity Office, an affiliate of The Blackstone Group, sold the approximately 306,000-square-foot Class A office property for $128.5 million, or about $420 per square foot, according to sources with knowledge of the transaction.
The office park, located at 901 and 951 Mariners Island Blvd. and 999 Baker Way, is home to technology tenants, including Marketo, Actuate Corp. and BrightEdge.[contextly_sidebar id=”qhSQyRTGTv2QS7jULVZJUDS28ULvxTdj”]BayCenter benefits from its location with easy access to Highways 92 and 101. It also is adjacent to the Bridgepointe Shopping Center, featuring retailers such as Target, Home Depot and Bed, Bath & Beyond.
Spieker Properties Inc. built BayCenter between the mid-1980s and the early ’90s and it features “phenomenal construction quality,” said Steven Golubchik, a managing director in the San Francisco office of commercial real estate services firm HFF, who worked on the sale. Equity Office acquired Spieker in 2001.
Interior renovations over the past three years updated much of the space with open floor plans desired by tech companies, and Rockpoint likely will make exterior and common area improvements.
“[BayCenter’s] plazas and esplanades will be reactivated in a modern way to create the same environment that tenants have been searching for in the city,” said Mike Moran, a managing principal with commercial real estate services firm Cassidy Turley in Burlingame. Moran was part of a team that worked on the sale with HFF. Cassidy Turley also will be the leasing agent for Rockpoint. Rockpoint declined to comment.
The buildings at 901 and 951 Mariners Island Blvd. are nearly fully leased, while 999 Baker Way carries a small percentage of vacant space. The Baker Way building has the most upside potential as about 30 percent of the leases will be rolling over in the next 18 to 36 months, Moran said.
Chicago-based Equity Office, which owns and operates commercial office space nationwide, has other Bay Area properties for sale, including the 309,000-square-foot office tower at 10 Almaden Ave. in San Jose. The company recently sold the Pruneyard mixed-use development on South Bascom Avenue in Campbell. The complex was purchased by San Francisco-based Ellis Partners and New York City-based The Fortress Group for a reported range of $285 million to $300 million. Equity Office carries about 13 million square feet of office and R&D space in Northern California. The company declined to comment.
San Mateo County is experiencing a boost in office rents with prices averaging $3.69 per square foot during the second quarter this year, up from $3.54 per square foot in the previous quarter, according to a report by Colliers International. Further, office vacancy in the county slid to 11.11 percent during the second quarter this year, down from 11.28 percent last quarter.
Industry experts expect this trend to continue.
“We are expecting a significant surge in asking rates moving forward as the better assets trade hands and the new institutional buyers come in with their new vision and capital plans” to update buildings, Moran said, adding that Peninsula office properties average about 25 years in age.
As supply in neighboring markets of San Francisco and Silicon Valley lessens, investors foresee more tenants seeking Peninsula space, added Randy Keller, a managing director at commercial real estate services firm Avison Young in Foster City.
“There’s tons of capital out there looking. The demand to put equity into buildings on the Peninsula is high,” he said.
“San Mateo County has been a quiet participant in the resurgence of the economy,” Moran said. “We haven’t had the fanfare of downtown San Francisco and [its South of Market district] nor the Palo Alto [and] Mountain View markets, but we have worked through a significant portion of our county’s vacancy while raising our [office] rates.”
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