Santa Clara County Pays $252MM to Snap Up Land for Growing Workforce

Santa Clara, Bay Area, San Jose, San Jose Mercury News, Lenzen Property, Public Health Department, Santa Clara County, General Fund

By Meghan Hall

Santa Clara County has snapped up several properties — paying private property owners a combined $252 million in two deals — since July 2018 in an effort to find space for its growing workforce. The acquisitions come during a period where the county — and the greater Bay Area — have experienced unprecedented economic growth over the course of the past several years, prompting employers to seek new space to keep up with expanding operations.

According to Santa Clara County’s Director of Facilities and Fleet Jeffrey Draper, the county has largely outgrown its available space, with two to three employees sharing a cubicle at some of its locations.

“We’ve been growing out of our existing buildings,” said Draper. “This is to address space needs.”

In 2013, Draper estimates the county had around 14,000 people under its employment. Today, that number is closer to 20,000.

Santa Clara County closed a $174 million dollar deal in July for the purchase of four buildings at 110, 130, 150 and 180 W. Tasman Drive in north San José, according to county documents referenced in a report by the San Jose Mercury News. The buildings total around 435,000 square feet, and the county paid approximately $400 per square foot.

The second transaction has yet to close but will cost Santa Clara County $58 million and is comprised of two parts. The first acquisition includes five buildings located in southeast San José on property bounded by Silver Creek Valley Rd., Hellyer Ave. and Fontanoso Way, for which the city will pay $51 million. The county is also expected to buy 7.9 acres of land off of Embedded Way for $7 million. The deals are expected to close in November 2018.

County officials are trying to plan ahead as much as possible: As companies continue to compete for commercial office space in San José’s tight real estate market, purchasing property has become the more feasible and fiscally responsible option.

“In the short term, we’d be getting out of lease space,” said David Berry, chief of facilities planning services for Santa Clara County. “Over a longer-term period, owning is more cost effective.”

Draper quickly echoed Berry’s thoughts. “When the county buys a building, it’s for 50 years or more. It’s not a 20 or 30 year proposition.”

The county is planning for future growth with the purchases in an era where it is increasingly competing with the region’s biggest tech companies for both employees and available space. Companies are increasingly looking to lease already-built space, as constructing offices from the ground up is often costly in both time and money. Draper and Berry agreed that the tech industry is its biggest competitor — for both office space and employees — and estimate that its workforce will continue to grow by two to three percent per year.

“It’s a good investment where you have a lot of growing tech companies,” said Berry. “We’re competing for a lot of employees in these cases, and we’re trying to improve our employees’ quality of work life.”

County officials also hope the acquisitions will help relocate employees, so that the county can get rid of or reposition some of its older properties. Draper says that the Lenzen Property, where Santa Clara County’s Public Health Department is located, could be one of the properties the county lets go in the future.

“It’s a really an old former hospital building, and it’s a maintenance hog,” said Draper. “It’s not configured for a modern workplace by any means.”

Despite planning for the future, Draper admits the county is playing catch up.

“We do know the present situation is that we’re tight for space,” said Draper. “We’ve been hiring a lot of people over the years and have not kept pace with the space needed for these people.”

When asked why the county waited to pursue the acquisition of new office space, instead of purchasing property when prices were lower, Draper and Berry stated the 2008 economic downturn made buying property unattainable. During the recession Santa Clara County funneled its available money from the General Fund toward maintaining and subsidizing services for its residents. Many residents appealed their property taxes, and combined with additional cutbacks to county resources, the county did not have enough available funds to purchase property as the economy recovered.

“We just didn’t have the resources to do it at the time,” said Draper. “I think we’re making, strategically, the right moves. We follow the economy.”

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