By Nancy Amdur
With increasing demand for Peninsula office space, more developers are planning to add to the area’s quickly shrinking inventory.
“There is an ongoing demand,” for space, said Timothy Grant, a senior vice president of office leasing, investment and tenant representation at commercial real estate brokerage Avison Young in Foster City.[contextly_sidebar id=”aCqGCZ3EeXcL5ZYvROwZpWflEqxYVJ3V”]New York-based Deutsche Asset & Wealth Management and Belmont-based Embarcadero Capital Partners are gearing up to break ground in June on a roughly 110,000-square-foot office building and parking garage at the 22-acre Clearview Business Park in San Mateo, said Carol Donnelly, the director of leasing at Embarcadero Capital. The project includes razing a 9,000-square-foot vacant building—formerly used as a restaurant—at the site.
The new three-story building, designed by San Francisco-based Korth Sunseri Hagey Architects, will offer large floor plates measuring about 36,000 square feet, panoramic bay and mountain views and signage visible from the freeway. The new building could house about 480 employees.
San Francisco construction company Build Group Inc. is working on the approximately $18.7 million project, according to the company’s Web site. Construction should be complete in August 2016, Donnelly said. The project was approved with a five-story 666-car garage, but the new owners have applied to add a sixth floor of parking, according to Christy Usher, a San Mateo city planner.
Deutsche and Embarcadero Capital last year spent about $125.5 million to buy the 270,000-square-foot office campus at 3000-3155 Clearview Way. It was sold by Los Angeles-based Lowe Enterprises and partners O’Connor Capital Partners and Pearlmark Real Estate Partners with city approvals for expansion already in place. The property is located off Highway 92, between Highway 101 and Interstate 280. Tenants include solar power provider SolarCity and wearable camera company GoPro.
Also, San Carlos is expecting to receive an application this month for what could be the city’s largest office project in many years.
Palo Alto-based Windy Hill Property Ventures is in the concept phase of a plan for a 560,000-square-foot development on eight acres near the corner of Industrial and Branston roads, said Al Savay, the city’s community development director. The proposed office campus would comprise two buildings and associated parking. The real estate investment company recently purchased multitenant light industrial/warehouse property comprising 50,094 square feet at 837-887 Industrial, according to a fourth quarter 2014 Peninsula Research & Forecast Report by commercial real estate brokerage Colliers International. San Carlos-based family-owned Tanklage Partnership sold the property, and the deal closed in December, according to the San Mateo County Assessor’s Office. Windy Hill did not return calls for comment.
The six one-story Industrial Road buildings, built in the 1960s, are located close to Highway 101 and offer high visibility. They are in an industrial development area, and the city would have to rezone the property to allow for the office project, Savay said. San Carlos also is working on a 200-room hotel development at Holly Street and Industrial, which is just to the north of the Windy Hill property. Irvine, Calif.-based R.D. Olson Development will construct the hotel on city-owned property.
“It’s an area of transition,” Savay said. “A lot of older buildings are there.”
“We always anticipated this would be a change area, so our zoning allows for some flexibility when a special project comes through,” Savay added.
“As we get more land constrained” some older properties on the Peninsula are ripe for redevelopment as they possibly are “not at their highest and best use any longer,” Grant said.
San Mateo County’s office vacancy rate is at its lowest since before 2001, dropping to 8.23 percent during the first quarter 2015 from 10.44 percent in the previous quarter, according to a Colliers report. The average asking rate for San Mateo County is $4.23 full service, up from $3.84 last quarter. Also, net absorption for the quarter totaled 213,544 square feet, almost double the net absorption in the same quarter last year.
“The office market on the San Francisco Peninsula continues to lead the region, closing two years of steady declines in vacancy rate and aggressive rent growth that has now broadly extended across virtually every submarket here,” the report states.
Rendering courtesy of KSH Architects