By Meghan Hall
The jury’s still out on the future of office, but investors aren’t hesitating in buying up available assets. According to public records filed with the county, Walnut Hill Capital paid $53.9 million, or about $1,557 per square foot, to acquire a Palo Alto office building. The deal closed on February 18, 2022.
The asset is located at 379 Lytton Ave. and totals 34,600 square feet. The seller is an entity associated with Doris Davis of Lytton-Campbell Associates, LLC. A listing on LoopNet shows that the Class B building was originally constructed in 1987 but boasts a newly refinished exterior. In all, it rises three stories and includes 87 parking spaces.
The property also borders both residential and commercial uses and is near shops like Vino Locale, tono coffee project, Crepevine Restaurants and Starbucks. Stanford Shopping Center, as well as Lucile Packard Children’s Hospital, are also nearby.
The Silicon Valley office market–including Palo Alto–continues to be buoyed by the ongoing presence of major tech firms. Net absorption for the office market at the end of the fourth quarter was about 465,000 square feet, and marked the first time absorption was positive since the third quarter of 2019, according to a recent report by Newmark. However, year-over-year, absorption totaled a negative 1.1 million square feet.
Meta Platforms, LinkedIn and other tech-focused firms recorded the largest leases of the quarter. Meta leased 719,037 square feet in Sunnyvale at Moffett Park, while LinkedIn took 194,624 square feet at Peery Park. Bloom Energy leased just under 33,000 square feet in North San Jose, and Eargo signed up for 25,417 square feet in North San Jose, as well.
With little absorption, vacancy increased to 15%, up year-over-year from 11.5 percent. Asking rents increased marginally, to $5.02 per square foot–an all time high. While these fundamentals may appear soft, Newmark notes in its analysis that current demand is between nine and 10 million square feet, which is close to pre-pandemic levels. The brokerage firm predicts that the market will largely recover through 2022.