By Meghan Hall
One investor is betting big on retail real estate in the Bay Area, acquiring multiple assets just before the end of the month. Chicago-based Oak Street Real Estate Capital closed on six grocery retail sites in San Jose on November 23rd, paying a combined $89.1 million for the properties.
The deal was first reported by The Mercury News.
In the biggest transaction, Oak Street Real Estate purchased a Lucky Store at 129 Bernal for $27.9 million. Two additional Lucky stores, located at 3270 White Road and 2027 Camden Ave., were bought for $26.7 million and $19.5 million, respectively. A fifth Lucky store at 551 E. Capitol Expressway closed for $22.3 million. Two FoodMaxx sites at 3002 Story Road and 5506 Monterey Rd., were acquired for $15 million and $20 million a piece.
Oak Street Capital manages both commingled funds and separate accounts on behalf of institutional and high net worth investors, such as the Pennsylvania State Employees’ Retirement System and the Chicago Public School Teachers’ Pension and Retirement Fund. The company often purchases assets from retail owner-users and then leases the property back to retailers.
A number of other retail sales have closed in Silicon Valley in recent months, often for local shopping centers. The Hacienda Shopping Center in Sunnyvale closed during the third quarter for $68 million, as did 1700-1730 Embarcadero Rd. in Palo Alto, which sold for just $54.5 million. The Bell Center, a smaller retail asset, was sold for about $13 million. All of the biggest transactions of the quarter were outside San Jose, where Oak Street’s most recent acquisitions took place.
Across the sector, vacancy and unemployment are trending upwards year-over-year, according to recent data collected by brokerage firm Kidder Mathews. Heading into the end of the year, vacancy increased to 3.8 percent in Silicon Valley. Asking rates are at about $2.88—lower than earlier this year but still higher than the third quarter of 2019. While not entirely good news, the retail fundamentals thus far are holding relatively steady, even with the uncertainty posed by coronavirus.