By Nancy Amdur
San Francisco-based developer Wilson Meany and its financial partner Stockbridge plan to break ground this month on the first of five office buildings slated for San Mateo’s Bay Meadows mixed-use community.[contextly_sidebar id=”djOeDJN8yy5n0AE862JmpVMBDFzopBJe”]The 210,000-square-foot Bay Meadows Station 4, at 3050 S. Delaware St., will be the largest of the transit-oriented development’s office buildings, which together will comprise 750,000 square feet of Class A office space.
Wilson Meany chose Station 4 as Bay Meadows’ first office project in part because it is conveniently located adjacent to Caltrain’s Hillsdale station, said Janice Thacher, a partner at Wilson Meany.
No tenant has yet signed a lease for the office building, although there are “active discussions” with potential tenants, Thacher said. The property, designed by HOK Architects, is being leased by Newmark Cornish & Carey.
Wilson Meany is poised to start construction on two other Bay Meadows office buildings “very quickly” should a potential tenant require more space, Thacher said.
Two Bay Meadows residential buildings, comprising 225 units, also are scheduled to start construction early next year. The apartment buildings and the office project will form the community’s “Town Square” and should all be complete in 2016. “The decision to start with Station Block 4 was driven by that location and forming up that heart of the community around the Town Square,” Thacher said.
“Town Square” also will include ground-floor retail space with restaurants and cafes, she said. Additionally, the 108-unit Field House, which includes 91 apartments and 17 townhomes, is nearly complete and will begin leasing next month.
Developers are becoming more comfortable with speculative development as demand is strong for Bay Area office space.
“Clearly the activity in the market has been important in our decision to move forward [with the project],” Thacher said, adding that there also are “not a lot of large blocks of space” in the area.
“For the market on the entire Peninsula, the improvement we’ve seen over the last four or five years has been really dramatic and very consistent,” said Mike Cobb, a senior vice president in commercial real estate brokerage Colliers International’s Redwood City office.
For the greater Peninsula, comprising San Mateo County plus Palo Alto, Mountain View and Los Altos, office vacancy was at 8.64 percent at the end of the third quarter 2014, a fairly significant dip from last quarter’s rate of 9.39 percent, and the lowest level seen since the dot-com era of 1999 and 2000, according to a report by Colliers.
Office vacancy in San Mateo County totaled 10.74 percent at the end of the third quarter, just slightly down from 11.11 percent last quarter, according to the report.
Other developers also are showing confidence in the Peninsula market. For example, Kilroy Realty Corp. began construction last year on its Crossing/900 office project in Redwood City without a signed tenant. The company last month leased the approximately 300,000-square-foot building to cloud storage firm Box, Inc.
“[Speculative building] shows that developers and the financial community have a lot of faith in what’s happening locally and in the market going forward,” Cobb said.
San Mateo, centrally located between San Francisco and Silicon Valley, is home to tech companies such as GoPro and Marketo. Global brands based in San Mateo County include Oracle, Sony and Franklin Templeton.
Bay Meadows, the former site of a horse-racing track, is spread among 83 acres and will include more than 1,100 housing units and 18 acres of parks. A private high school and community garden opened over the past two months. Next on Bay Meadows’ slate is phase one of a “social street” retail-and-entertainment area featuring pop-up amenities such as a bocce ball court or a beer garden. The entire community is scheduled to be complete by 2020, depending on the market. Bay Meadows also includes residential communities with for-sale homes built by Shea Homes and Tri Pointe Homes. About 300 residents live at Bay Meadows and 500 residents are expected to reside there by year-end, according to a Bay Meadows spokeswoman.
Cobb expects Bay Meadows to stand out in the Peninsula market.
“It checks all the boxes on what the market wants to see,” he said. “It’s transit oriented, it’s going to be loaded with amenities, there’s a residential component, so it’s walkable for employees. It’s a win.”
More office projects likely are in the Peninsula pipeline, including some built on spec, he said.
“There was a little pent-up demand. We’re just now seeing a resurgence of speculative building around here, and there’s going to be more, “Cobb said. “This is a very good sign.”