Menlo Equities Spends $88.5MM to Acquire Sunnyvale R&D Buildings

By Meghan Hall

The new year is off to a quick start for Bay Area commercial real estate, as a number of new transactions have come to light. In a deal finalized just yesterday, an affiliate of Menlo Equities has purchased two parcels in Sunnyvale for a combined $88.5 million, according to public records. Public records show that the seller of the assets was Newport Beach, Calif.-based Miramar Capital and an affiliate, Garrison Investment Group.

The properties acquired by Menlo Equities are situated at 892 and 894 Ross Drive. The multi-tenant, Class B property was originally built in 1985. In all, the buildings total just under 95,000 square feet. The campus is minutes away from Pathline Park, home to Synopsys, Apple and others. Google’s campus is also just located directly across the Southbay Freeway.

“Given the recent rapid absorption of newly constructed projects, the lack of new product coming out of the ground, the flight to quality locations and product, and the historically explosive nature of absorption in the Valley, Menlo Equities will be very well positioned upon delivery of 888 Ross Dr.,” said Andy Zighelboim, an executive Vice President at Colliers who helped to broker the deal. In addition to Zighelboim, Colliers’ Bob Gilley, Kevin Moul and Brad Idleman represented the sellers in the deal. 

Menlo Equities’ plans for the property are currently unclear. The firm was established more than 20 years ago and targets tech-oriented, high-barrier-to-entry markets. According to the company’s website, Menlo expanded its core-plus portfolio to more than 4.3 million square feet in 2020; the assets have a value of $1.6 billion. And, in addition to growing in Northern California, the firm has recently expanded into Northern Virginia, Atlanta and Chicago.

By the end of the third quarter of 2021, the Silicon Valley R&D market was once again gaining momentum. Total gross absorption in the submarket reached 1.9 million square feet, up 1.5 million square feet from a year ago, according to a recent report by Newmark. However, the market still has a ways to go before recovery is complete. Vacancy rates sit at about 12.7 percent, while rental rates dipped to $2.36 per square foot per month.

Experts still maintain that despite a muted market, investor interest continues to provide a silver lining. Exeter Property Group acquired the Assembly at North First for $192 million, while Apple spent $450 million to purchase a number of Cupertino buildings. More recently, LinkedIn purchased several buildings on Maude Ave. near its headquarters for $122.8 million. Combined, the deals signal investor’s long-term commitment to the market, even as fundamentals remain soft.

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