By Meghan Hall
For the first time since its construction in 2000, Northpoint Plaza in Los Gatos has hit the market. The commercial property, located at 634 N. Santa Cruz Ave. is currently owned by San Jose-based Marwood Assets Management. However, that is expected to change as Marwood has decided to sell after nearly five years of ownership.
“They are a value-add group and they’re looking to reinvest and buy other properties that they can improve,” said Howard Berry, Senior Vice President with Colliers International, the firm marketing the property for sale. “It has some strong tenants, and they are looking to increase the value of other assets.”
Marwood Assets Management purchased the property back in 2013. The company’s website states that the property was purchased out of foreclosure, and at the time Marwood bought the property, it was 50 percent vacant. Public documents indicate that the property was purchased for $1.7 million.
Berry did not close guidance pricing for the property, but did say that comps in the area were going for between $600 to $1000 per square foot.
Renovations to Northpoint Plaza wrapped up in 2018 and included a complete façade update, new signage and landscaping. The exterior of the property reflects Spanish revival architecture, while the inside includes modern, Class A-like office spaces, break areas and conference rooms. Marwood invested about $1 million in renovations over the past four years, according to Berry.
“It’s a Class A-style building that has been improved very nicely,” said Berry.
The asset is currently 100 percent occupied by 13 tenants, a mix of national credit and local businesses, according to a property flyer circulated by Cushman & Wakefield. The average remaining lease term for tenants is about three years, with office and retail spaces renting for approximately $4.30 per square foot full service gross and $3.85 per square foot triple-net, respectively. The building has about 17,848 net rentable square feet. Current tenants include Thomas Foods, Los Gatos Alterations, Sereno Properties, Gianni’s Salon and Los Gatos United Soccer League.
“Los Gatos is one of those markets where people who live in Los Gatos want to have their offices [nearby],” explained Berry. “We have a lot of tenants who live in the area who want to occupy those spaces.”
The town of Los Gatos, established in 1887, is an executive community, offering a small town feel with high end restaurants, cafes, galleries and boutique shops. The town of 30,000 is growing quickly, as it is within a half hour’s drive of two international airports—San Jose International and Oakland International — and is a 20-minute drive from major downtown centers that are home to some of the region’s largest employers, including Google, Facebook and Amazon. Netflix, another major employer, occupies more than half a million square feet in Los Gatos itself.
Northpoint Plaza is within the West Valley submarket of Silicon Valley, which includes Cupertino, Los Gatos, Saratoga, Campbell and West San Jose. The total base office inventory for the market is about 13.7 million square feet, with 5.5 million square feet classified as Class A product. Just 2.3 million of the West Valley’s office stock is located in Los Gatos; of that, just over 906,000 is Class A.
When it comes to leasing fundamentals, the Los Gatos office vacancy rate hovers around five percent, according to the marketing brochure, and has remained in single digits since 2012 for a total of 28 consecutive quarters. Class A vacancy is even lower, and has sat around three percent since the third quarter of 2013.
A mix of other, smaller, retail and office buildings have sold in Los Gatos over the course of the last year. The largest among them and the closest in size to Northpoint Plaza, a 28,285 square foot office building at 16492 Los Gatos Blvd, sold in August of 2018 for $2.6 million, or about $91.92 per square foot.
Tight market conditions are expected to continue, making the acquisition of Northpoint Plaza a valuable asset. Strong demographics and a severe lack of available development opportunities, and states the report, the majority of Class A construction in Los Gatos is centered around medical uses, single-user buildings or large block space that will not compete directly with Northpoint as an investment opportunity.
According to Berry, the property has received plenty of interest, including a few offers, although no contract has been signed.