Roku to Take 472,000 SQFT at Coleman Highline in San Jose

By Vladimir Bosanac

One of San Jose’s newest developments is poised to become home to another Silicon Valley stalwart. Roku, the maker of popular digital video broadcasting equipment, will be taking 472,319 square feet at the Hunter Storm development in San Jose, the Coleman Highline. Roku, which has been looking for a new headquarters for several months announced in a SEC filing the details of its lease.

Roku, which means six in Japanese, is the sixth company that its founder Anthony Wood started. As a former vice president of Netflix, Wood was able to negotiate an investment from his former employer to finance the company and build the device enterprise. The company at that time was based in Palo Alto and eventually moved to Saratoga. Following continued growth and successful fundraising, the company in 2015 decided to sublease space from Netflix in Los Gatos, a place it still calls home.

In September of 2017, the company went public on the NASDAQ exchange. Although it generated revenue of $512.76 million in 2017, Roku still lost money for the year in the tune of $63.51 million.

At the end of 2017, the company reported 817 employees.

Yet, with an acquisition a Danish smart speaker in November of 2017, the company seems ready for growth and a new home.

“We embarked upon a 9-month search and negotiating period and are pleased with the results,” said Phil Mahoney, executive vice chairman of Newmark Knight Frank in Santa Clara, who led the leasing efforts for Roku along with Jeff Rodgers, senior managing director. “Coleman was the best solution from a timing, commute, amenities, economic and expansion standpoint. Roku is growing rapidly, and this opportunity presents a campus home for sometime to come.”

This growth will come in four buildings that the company will be leasing starting in early 2019. According to the filing, Roku will lease space at the following locations:

• 1155 Coleman Avenue, San Jose, California, consisting of three (3) floors of the building totaling approximately 91,368 rentable square feet (“Building 2”)
• 1173 Coleman Avenue, San Jose, California, consisting of the entire building totaling approximately 194,790 rentable square feet (“Building 3”)
• 1167 Coleman Avenue, San Jose, California, consisting of the entire building totaling approximately 163,272 rentable square feet (“Building 4”), and
• 1161 Coleman Avenue, San Jose, California, consisting of the entire building totaling approximately 22,889 rentable square feet (“Building A2”)

The lease at Building 2 will commence first, and it is tentatively scheduled for January of 2019. Leases at the other buildings are scheduled to commence by March of 2020, and they are planned to terminate in approximately 140 months following the Building 2 commencement date.

Roku will be paying approximately $3.9 million in the first year for Building 2, increasing incrementally to $5.5 million in the final year of the lease. The other buildings will command a lease of around $16.9 million in the first year of the lease term, reaching approximately $22.8 million in the final year of the lease.

The company will also have one seven-year option to extend the initial lease and the right of first offer to expand into any space that becomes available in Building 2. In addition, Roku will be entitled to $39 million of tenant improvements.

Roku was attracted to the site for its amenities, the location, as well as the delivery timeframe of the project. “The city of San Jose, specifically planning, building and public works took an active role to insure the timely processing of permits, necessary to meet their schedule. Devcon construction also deserves credit too by helping us work with our valued sub contractors to meet our goals,” said Deke Hunter, president of Hunter Storm, the developer. He cited flexibility of the space, opportunity for growth, connectivity and a west side location were the top priorities for Roku, but so were rail, scalable power, access to residential and the design of the location.

Hunter announced earlier this year that 8×8, a leading provider of cloud communications and customer engagement solutions will be moving its headquarters to the development, as well. 8×8 will be the first tenant at the new Coleman Highline development in San Jose and will occupy all 162,000 square feet of Class-A office space in building number one.

“Our activity is solid keeping in mind we are really focused on tenants that are multi floor candidates. We can handle the larger requirements, and CBRE has done a great job with our message. Jeff Houston, Mike Benevento and Mike Charters have positioned our project well against the competitive alternatives,” said Hunter.

This activity has been in light of increased costs for tenants and landlords alike. “Rates are up partially from demand but mostly because costs are escalating. We have to push rate just to keep up with cost expansion,” added Hunter. “Projects that help you recruit and retain the best talent seem to get the most attention. Transit, west side, housing and supporting commercial services really set the bar for the best projects.”

West Coast Commercial Real Estate News