First New Office Project in 17 Years Finds New Owner
Orchard Corporate Center, a fully occupied 101,374-square-foot class-A office/R&D campus in North San Jose, was sold by its developer, South Bay Development Company, to a private investor.
SAN JOSE—In 2017, the first construction project on Orchard Parkway was completed since the turn of the century. And two years later, Orchard Corporate Center, a 101,374-square-foot class-A office/R&D campus in North San Jose, has sold to a private investor for an undisclosed price.
The seller was South Bay Development Company, which constructed the two-building campus that was completed in 2017. Both buildings were 100% leased at the time of sale.
Executive managing director Eric Fox, Adam Lasoff, Seth Siegel, Steve Hermann and Ryan Venezia of Cushman & Wakefield’s Northern California capital markets group advised South Bay in the disposition. Nick Lazzarini and Kalil Jenab of Cushman & Wakefield’s Silicon Valley office also provided local market advisory and negotiated leases with the current tenants.
“Orchard Corporate Center is a strong-performing high-quality asset fully leased to two long-term tech tenants and is surrounded by some of the world’s biggest and most influential technology companies,” said Fox. “The property represents the first new construction project on Orchard Parkway in 17 years, while major renovations have been completed on nearly every building situated on Orchard Parkway between North First Street and Trimble Road, substantially upgrading the overall quality and value of the neighborhood.”
Situated on 5.31 acres, the one- and two-story office/R&D buildings, respectively located at 2755 and 2777 Orchard Pkwy., feature identity branding, well-appointed lobbies, natural light and a 15,000-square-foot outdoor courtyard. Furthermore, the buildings’ high clear heights and loading capabilities lend versatility to accommodate a wide range of corporate uses.
“This is a new speculative ground-up construction project by South Bay Development that celebrated a highly successful campaign guided by their local ownership and development experience,” Jenab tells GlobeSt.com. “Cushman & Wakefield assisted South Bay with their initial off-market acquisition of the land, designing and leasing of the buildings, and ultimately the recent disposition.”
The campus has a strategic location on San Jose’s North First Street Corridor, long recognized as one of the most desirable trade areas in Silicon Valley. The site also provides close access to highways, walkability to VTA light rail and amenities, and immediate access to Mineta San Jose International Airport.
Silicon Valley’s office vacancy rate decreased slightly to 9.8% during the fourth quarter of 2018, down 20 basis points from 10% in the third quarter and well below the 10.9% rate of one year ago, according to a fourth quarter report by Cushman & Wakefield. The current rate translates to 8.1 million square feet of vacancy, a slight decrease from 8.2 million square feet in the third quarter. Although the vacancy decreased, the percentage of vacant sublease space increased to 30.5% of all vacant space, up from a figure of 26.3 % in the third quarter and well above the 10-year average of 15.5%.
New subleases on the market that affected this increase included Micron at 120 Holger at 172,000 square feet and GlobalFoundries at 2600 Great America Way at 100,000 square feet. It should be noted that sublease space is typically offered in an “as-is” condition, where most demand is looking for customized tenant improvements, says the report.