By Jon Peterson
The leasing efforts have begun on a new Class A 600,000 square foot office project in Foster City called Foster City Center at Chess Drive and Hatch Drive. The project is owned by Milwaukee-based Northwestern Mutual Real Estate Investments. The developer on the complex is San Mateo-based Sares Regis Group of Northern California.[contextly_sidebar id=”vXlS1hqBlF3XtVcmwcxP3pEfEIXpy9yB”]“This project will not be started on a speculative basis. It will need to have some leases signed with tenants before the construction of the project will be started. The amount of space that needs to be leased is somewhere in the range of 100,000 square feet,” said Jeff Birdwell, president of the commercial division of the Sares Regis Group of Northern California.
Northwestern Mutual is looking at funding the project itself. Richard Dooley, direct of asset management for the company in its San Francisco office, declined to be interviewed when contacted for this story. Sares Regis Group would not comment on the development cost of the project.
There are several factors that should give Northwestern Mutual an advantage versus the competition on a rental rate basis. “The fact that they are doing this project themselves and that they have owned this site for a very long time should allow them to offer rental rates at $.25 to $.30 cents below the competition. Another reason is that the project will not have any underground parking, which would add to the cost of the development,” said Jeff Holzman, senior vice president of the commercial division of Sares Regis Group of Northern California.
The interest in the project so far has come mainly from technology companies and life science firms, although the leasing of the property will be considered by a variety of tenants. Another potential group could be financial service firms. Mike Moran, a managing principal with DTZ in its Burlingame office, will lead the leasing efforts on the project.
Foster City Center development is planned to be completed in two phases. The first one will be a 275,000 square foot building, which will be followed by a 330,000 square foot phase two. The actual start and finishing date of these phases will depend on how the leasing efforts go. They could be all done potentially some time in 2017. The developers have an option on the site for a third phase, which would add another 200,000 square feet to the project in the future.
The first two phases of the project cover 9 acres of land. The site is currently occupied by eight multi-tenant industrial buildings, which would be demolished to make room for the new office project. The tenants in these buildings are on month-to-month leases at the moment, and they would be given six months’ notice as to when they would need to vacate the buildings; all have been made aware of the future plans. Sares Regis Group said they would lead an effort in assisting them in finding new space.
The office market in Foster City is in a good position in the market cycle. “The true current vacancy for Class A space in Foster City is now around 7 percent. Another positive is that rental rates over the past year have increased by 20 percent. There is very strong demand for a project like Foster City Center and it should be well received by the marketplace,” said Moran.