Tenants Look for Growth Space Beyond Sunnyvale and Mt. View
A loan of $84.5 million was secured to finance the $130 million acquisition of the office/research and development campus, Murphy Crossing, a JV buy between Soma Capital Partners and Timbercreek Asset Management.
MILPITAS, CA—Nearly 100% of scalable projects in Sunnyvale and Mountain View have been sold to users or encumbered by long-term leases, says Chris Moritz, senior managing director with Newmark Knight Frank. In response, he says potential tenants are now forced to look for options with space to grow in neighboring markets, placing Murphy Crossing in one of the most in-demand locations.
This type of tenant activity in Milpitas is also affecting investor demand. Namely, a loan of $84.5 million was recently secured for the acquisition of the five-building office/research and development campus located at 1001-1033 McCarthy Blvd. and 915-933 Murphy Ranch Rd. The $130 million acquisition involved a joint venture between Soma Capital Partners and Timbercreek Asset Management.
Newmark Knight Frank, as the exclusive advisor to Soma Capital Partners, secured the loan. NKF capital markets also represented the seller, Embarcadero Capital Partners and True North Management Group.
Ramsey Daya, NKF’s head of debt and structured finance for Northern California, and Moritz represented SOMA Capital in its financing efforts. The loan was placed with Deutsche Bank.
“Even with the combination of unprecedented liquidity in the debt markets and the continued strong fundamentals in the Silicon Valley, lenders remain focused on the strength and experience of borrowers,” Moritz tells GlobeSt.com. “The partnership of Soma Capital and Timbercreek Asset Management provides an exceptional combination of local operating expertise and institutional pedigree.”
Murphy Crossing is in the 237 Corridor with proximity to tech firms Google, Microsoft and Oracle. The campus provides tenants with access to public transit options (BART and the VTA light rail), as well as Highway 237 and Interstate 880.
“The North San Jose and West Milpitas submarkets have seen significant growth in tenant demand. These factors, along with the Murphy Crossing campus offering best-in-class office space, resulted in a competitive lending process,” says Daya.
The class-A campus spans 368,524 square feet on more than 20.5 acres featuring an on-site cafeteria, outdoor basketball and volleyball courts, bike storage and electric vehicle charging.
After another strong year, Silicon Valley’s office market slowed somewhat in the last quarter of 2019, according to a report by NKF. The market posted a net absorption of negative 350,574 square feet, its first negative absorption number since the third quarter of 2017. Although the overall availability rate rose very slightly by 0.2 percentage points to 9.24%, it was still 0.78 percentage points lower than the availability rate at the same time last year.
New class-A availabilities with higher asking rates coming to the market, specifically in Santa Clara and Sunnyvale, bumped up the average class-A asking rate by $0.31 per square foot to $4.92 per square foot. This also pushed the overall asking rate to a record-high $4.54 per square foot, says the NKF report.