By Meghan Hall
Wrapping up a busy second quarter of office transactions in Silicon Valley, St. James Plaza in San José has been sold by an entity associated with Brent W. Lee of San José, to Urban Community and Palo Alto-based venture capital firm Matrix Partners, for $40 million, or roughly $290 per square foot, according to public documents. The transaction was just one of many completed during the last three months as tech giants and developers alike secured large swaths of office space in one of the Bay Area’s most competitive sub-markets.
The nine floor, 138,100 square-foot building is located at 152 North Third St., in the downtown core of San José, right across the street from St. James Park, and several blocks from San José State University, the VTA Light Rail Station on North First Street and San José City Hall. The building has office suites ranging in size from 667 square feet to roughly 15,358 square feet, according to a property flyer. The ground floor has typically been reserved for retail uses.
The transaction, which took place at the end of June 2018, was one of the larger office transactions in the second quarter of 2018, according to Colliers International’s 2018 Q2 Silicon Valley Report. During the second quarter, only 160 West Santa Clara Street in San José, which totals 214,118 square feet, and was sold by PNC Realty Investors to Beacon Capital Partners for $101.5 million, was larger. 1 North First St. in San José—a development close in size and location to St. James Plaza—sold at the end of August 2018 for $46 million. Jay Paul bought the 110,000 square foot property, which is just a six minute walk from St. James Plaza, from San Francisco-based Lift Partners and Palm Beach Gardens, Fl.-based Westbrook Partners.
St. James Plaza last sold in an off-market transaction in May of 2013 when Lee bought the property from investment advisor and real estate equity funds manager Iron Point Partners LLC for $15.5 million. According to reports, Lee beat San Francisco-based Pacific Union Development Company, who had expressed a desire to convert the building into apartments, in securing the deal.
The transaction occurred during a period where the office vacancy rate was higher than most of Silicon Valley; according to Colliers’ 2018 second quarter report, San José’s office vacancy rate was 16.5 percent; only Santa Clara had a higher office vacancy rate at 18.8 percent. The average office vacancy rate across Silicon Valley hovered at around seven percent, while asking rents continued to climb. Around 70 percent of office space currently under construction is pre-leased as growing companies continue to plan ahead.