When San Jose, Calif.-based software firm Xilinx recently found themselves crunched for space, it also found itself facing a tough decision.

With Silicon Valley rents continuing to skyrocket — and downtown San Jose rates up nearly 43% during 2Q — the company began to consider an unusual move. Buying, it decided, could possibly prove cheaper than renting in the Valley’s overheated office market.

After searching for space, they found it in a two-building, 200,000-sf facility owned by Divco West. Divco was asking $5.75/sf for rent, which would total $138 million over the next decade.

So Xilinx paid $74 million cash for the North First Street property. Divco didn’t feel any pain either. They paid $20 million for the building in 1997.

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