Hines & Digital Realty Strike $60MM Deal for San Jose Development Site

Hines, Digital Realty, PG&E, San Jose, CBRE
Courtesy of CBRE

By Meghan Hall

As Hines continues to unveil its plans for the former PG&E in San Francisco, the international real estate firm is also continuing to solidify its presence in other Bay Area downtowns. In a recent deal, the company acquired 150 S. First St. in San Jose from Digital Realty. Hines paid $59.6 million, or about $332 per square foot for the property, according to the Mercury News.

Hines paid all cash in the deal. The property totals 179,800 square feet. The square footage is broken down into 121,200 square feet of data center space, 41,900 square feet of retail and 9,700 square feet of offices. The building also includes 263 underground parking stalls.

Originally, the asset was built in 1986 and subsequently renovated in 1999, according to marketing materials obtained by The Registry. The asset is 96 percent leased.

“The opportunity exists to redevelop this large, transit-oriented, 2.39-acre site in the heart of Downtown San Jose and capture the momentum of Silicon Valley’s largest urban area,” the offering memorandum, posted by CBRE, states. The property was brought to market unpriced and offered on an “as is, where is,” basis.

It is unclear what Hines intends to do with the property; however, San Jose has quickly become one of the most active cities when it comes to development. Since 2015, 2,200 new residential units have been delivered to downtown San Jose, and an additional 3,700 are under construction. 

Additionally, tech tenants are growing steadily downtown. In November 2014, there were 114 tech companies who called Downtown San Jose their home; by the end of 2018, there were 195, according to the offering memorandum. The migration of tech to San Jose has resulted in vacancy dropping 540 basis points, according to the memorandum. 

“Consistent with other transit-oriented downtowns in Silicon Valley, Downtown San Jose has seen an increase in technology companies and workers migrating to the submarket,” the documents explain. “Tech tenants are finding urban centers more appealing because of their live/work/play environment. This phenomenon is evident in Downtown San Jose, as over the past three years it has witnessed a 60 percent increase in the number of technology tenants occupying space…”

Hines, first founded in 1957, has a presence in 355 cities and 27 countries. Recent statements from the company indicate that it currently has around $83.6 billion in assets under management. Over the course of its history, Hines has developed, redeveloped or acquired around 1,486 properties totaling 492 million square feet. The company has more than 171 developments underway around the world.

West Coast Commercial Real Estate News