By Jon Peterson
The State of Michigan Investment Board has approved a $44.4 million equity investment into a new office building development in Sunnyvale, as stated by the pension fund in a board meeting document. The project is a 125,000 square foot development located at 265 Sobrante Way.
The investment by Michigan is part of an existing separate account the pension fund has with Principal Real Estate Investors. The real estate manager declined to comment on the Michigan investment and what the total cost of the development will be.
Principal is developing the project along with San Francisco-based SteeleWave as its local development/operating partner. The likely start of the development project is planned for sometime in March or April of 2019. The site of the development has no existing buildings on it.
The project, which does not have a lease commitment in place at the moment, will be started on a speculative basis. “We have seen some tenant interest in our project, but no leases have been signed. We believe that the Sunnyvale office market is a strong one. It has very low vacancies for office buildings now, in the sub four percent range. Our site is also within walking distance to a Caltrain stop. We think this is important, [since] history has shown that being near a Caltrain stop leads to more tenant interest in your building and higher rental rates,” says Rod Vogel, senior managing director for Principal.
The office building to be developed will be a four-story complex. No name for the project has been officially stated at this time. “Our design for the project does allow for either a single- or multi-tenant building. I would think that the whole building would end up being leased to one company,” said Vogel. The leasing efforts on the project are being led by Dave Sandlin, an executive vice president with Colliers International in its San Jose office.
Principal is no stranger to owning or developing office buildings in Sunnyvale. The real estate manager is the owner of a 650,000 square foot property about a block away from the new development. This is the Sunnyvale Business Park, and its located at 680 and 840 West California Avenue.