Santa Clara Office Property On 15.7-Acre Project Site Trades for $101.38MM

Amazon Web Services, Oppidan Investment Company, Santa Clara, KTJ LLC, CBRE, Prudential Real Estate, Kinship Capital, Pearlmark Real Estate
Image Courtesy of Kinship Capital

By Meghan Hall

Following closely on the heels of tech, data providers are increasing their presence in the San Francisco Bay Area, and real estate for data centers has become a wanted commodity in its own right. Following this trend, an office and research and development property in Santa Clara — one that is fully entitled for a new, 500,000 square foot data center — has traded for $101.38 million in a transaction that closed just before Christmas. The seller of the property was Madison, N.J.-based Prudential Real Estate Investors. The buyers, according to public documents, IPI Partners and Oppidan Investment Company. The Mercury News has reported that the property has been leased to Amazon Web Services for the next 15 years, and that the company has an option to buy down the line.

The property was being marketed by Newmark Knight Frank brokers Phil Mahoney and Jeff Arrillaga.

Prudential originally acquired the property in December of 2014 for $95 million. At the time, a joint venture between Kinship Capital and Pearlmark Real Estate Partners decided to sell the asset after just a year of ownership. In 2013, the two firms purchased the property for $67 million.

Located at 2305 Mission College Boulevard, the property is currently developed with a two-story 358,000 square foot office and research and development building and paved parking lot. The building was completed over the course of a decade between 1975 and 1985, and was further renovated between 1997 and 2005.

The property sits on nearly 16-acres and could present a healthy redevelopment opportunity for its new owners. Last year, Prudential had received approval to demolish the existing building and redevelop the property into a two-story, 495,610 square foot data center. The data center would be home to computer servers for private clients and would be designed to provide 60 megawatts (MW) of information technology power, states project documents. A mezzanine would be located on each floor on the eastern and western sides of the buildings, and additional employee amenities would be located in a wing to the west.

It is unclear whether or not the new owners will pursue development with the entitlements secured by Prudential. However, a report released mid-2019 by CBRE—the most recent available—indicates that demand for data centers in Silicon Valley continues to increase. Primary U.S. wholesale data center markets (Atlanta, Chicago, Dallas/Ft. Worth, New York Tri-State, Northern Virginia, Phoenix and Silicon Valley) recorded a combined 171 MW of net absorption during the first half of 2019, more than 56 percent of 2018’s record.

Silicon Valley has an inventory of 296.6 MW and has experienced an increase of 35.1 MW year-over-year. Data center vacancy in the region remains at about 7 percent, one of the lowest in the nation, with rental rates reaching $165 per kilowatt per month. CBRE predicts that demand will continue for data centers, as seen by projects currently in the pipeline by CoreSite, Cyxtera, element Critical and Vantage. During the first half of the year, Vantage landed a 21-MW requirement, while CoreSite signed a 12-MW deal of its own; both companies have an additional 12 MW of capacity in the works.

West Coast Commercial Real Estate News