By Meghan Hall
Over the past two years, North San Jose has emerged as a hub for growing firms looking to escape more cramped Silicon Valley markets such as Menlo Park, Sunnyvale or even downtown San Jose. This migration has benefitted landlords looking to lease up large blocks of space, including Newport Beach, Calif.-based KBS, who over the past couple of years has sought to reposition its own asset in the region. After fully completing renovations to District 237, a Class A office campus off of North First Street, in March of 2019, KBS has been working to sign tenants. This past week, U.S. defense contractor Raytheon signed a 144,000 square foot lease at the property.
The transaction was first reported on Wednesday by the Silicon Valley Business Journal. The lease will span two buildings located at 100 Headquarters Drive and 200 Holger Way, and total 45,831 square feet and 97,777 square feet, respectively. Raytheon plans to move into its new space at the beginning of 2022.
In April of 2019, KBS announced that CDK Global, an IT service provider, signed a 76,410 square foot lease at 250 Holger Way.
The 33-acre property was originally developed by Menlo Equities and affiliates with iStar Financial Inc. beginning in March of 1998. KBS first acquired District 237—formerly known as the Corporate Technology Center—in the spring of 2013 for $239 million. At the time, KBS owned all eight buildings that were part of the center, which totaled 615,233 square feet and included tenants such as Ericsson, AT&T and Dell.
By July of 2018, KBS had sold off three of those buildings, according to public documents and reporting done by The Registry. 400 Holger sold for $49.15 million in June of 2018 to an entity associated with Tampa, Flor. -based Carter Validus; 450 Holger was sold to tenant Microchip Technology for $40.846 million, and 475 Holger was sold for $7.45 million to an entity associated with MSK Ventures and Sierra Vista Apartments.
KBS retained the four other buildings and embarked on repositioning and rebranding the aging complex. Currently, there is 415,700 square feet of rentable space across five buildings located at 300, 250, 300 and 350 Holger Way and 100 Headquarters Drive in the office complex. KBS began exterior renovations in June of 2018 as well as interior renovations of 350 Holger Way that include new creative office space, a tenant lounge, gym and outdoor amenity areas.
The repositioning comes at a time when the Silicon Valley office market remains hot and North San Jose is becoming increasingly popular. While Sunnyvale was responsible for 51 percent of all Silicon Valley office absorption during 2019 according to a report released by CBRE, 2019 was by no means a bad year for North San Jose.
In April, ASML took 256,000 square feet across three DivcoWest buildings in North San Jose, and in May of 2019, cloud-based information security company Zscaler procured 172,000 square feet from Micron Technology at 120 Holger Way, just up the street from District 237. At the end of last year, software firm Bill.com signed a 131,801 square foot lease at the America Center, also in North San Jose.