Seven months after leasing an office campus in Sunnyvale, California to Meta and 14 months after buying the 719,037 square foot property for $356 million, Tishman Speyer sold the complex to Commonwealth Partners for $707 million in Silicon Valley’s biggest investment sale.
Bloomberg was the first to report the sale price for the property which has four low-rise buildings at 1275, 1345, 1375 and 1395 Crossman Ave. in the sought after area of Moffett Park.
Without disclosing how much CommonWealth Partners paid for the campus, Tishman Speyer CEO Rob Speyer said in a prepared statement that Sunnyvale was a great achievement. He said the sale and lease to Meta, parent company of Facebook, in December 2021 demonstrates that Silicon Valley remains a global center of innovation and that there is still a strong market for highly collaborative and well-built office spaces. designed with accessible green spaces and level amenities.
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Campus amenities include a gym with basketball court, lockers, showers, outdoor volleyball court, executive briefing center, full-service cafeteria, multiple kitchens, breakout centers, and other spaces common.
Tishman Speyer acquired the property in April 2021 from NetApp, a Fortune 500 cloud services company that was moving to a smaller location in San Jose, Calif., more suitable for a hybrid workforce. Carl Shannon, senior managing director of Tishman Speyer, noted in prepared remarks that the company seized a rare opportunity to purchase and reposition the office campus during a time of significant uncertainty. He said they were able to reward the trust of their co-investors with “outstanding performance in just over a year”.
The transaction is the largest investment sale in Silicon Valley history, according to Newmark. Tishman Speyer was represented by Newmark’s Kevin Shannon, Steven Golubchik, Phil Mahoney, Jonathan Schaefler and Darren Hollak in the sale.
CommonWealth Partners, a national real estate investment, development and management firm headquartered in Los Angles and New York, is no stranger to setting records for its purchases. Late last year, CommonWealth Partners acquired Hudson Commons, a 25-story trophy office tower at 441 Ninth Ave. in Manhattan from Cove property group and Baupost Group for $1.033 billion. It was the largest office contract in Manhattan since the start of the COVID-19 pandemic and the only one to exceed $1 billion.
The acquisition of the Sunnyvale complex brings CommonWealth Partners’ holdings in the Moffett Park/Sunnyvale market to over 1.25 million square feet of LEED Gold/Platinum Trophy office space. Founded in California in 1995, the company has a long and successful history in the market.
An example is the renewal of the recently signed lease of an international law firm Wilson Sonsini Goodrich & Rosati at 650 Page Mill Road in Palo Alto, California. The company has over $10 billion in assets spread across the United States, including New York, Washington, DC, Seattle, San Francisco, Silicon Valley, San Diego, Los Angeles and Boston. In May 2020, CommonWealth Partners and California Public Employees Retirement System (CalPERS) refinanced City National Plaza, a LEED Platinum, 2.5 million square foot mixed-use and office complex in downtown Los Angeles, for $550 million in one of the first CMBS loans to be born at the height of the pandemic.
Brett Munger, CEO and Managing Partner of CommonWealth Partners, said in prepared remarks that the purchase of the Sunnyvale campus was a compelling investment that increases the company’s presence in a strategic high-growth Silicon Valley submarket. . He said the acquisition in a dynamic market that has become a hotbed of expansion for high-credit tech companies like Google, Amazon and Meta diversifies the company’s portfolio and reinforces its commitment to being one of the leading providers of high-quality office space in the region.
In its report on the San Jose-Silicon Valley market for the first quarter of 2022, Avison Young noted that confidence in the future of the office market in the region remains high. JLL also reported that an increase in rental activity in Silicon Valley was expected as more businesses begin to reopen.
“Tenant needs reached a record 3.7 million square feet, supplementing demand. Additionally, pre-launch engagements are expected to be delivered over the next three quarters, which is expected to increase office occupancy by 3.4 million square feet,” JLL said in its Q1 Office Insight report. 2022.
Kidder Mathews noted in its report on Silicon Valley office market trends for the first quarter of 2022, companies were more open to pursuing long-term leases and renewals, with indoor mask mandates lifted in March .
“Big tech companies are planning strategies to better utilize their office spaces, ranging from hybrid work schedules to a full five-day pre-COVID workweek,” Kidder Mathews wrote.
Kidder Mathews said the large concentration of tech and biotech companies in the area is fueling demand for more office space and also noted that landlords have been reluctant to lower asking rates “especially with the market sentiment of more closer to a full recovery.” In fact, the company reported that asking rental rates increased 2.1% year-over-year. Total net absorption was 813,035 square feet and had remained positive for three consecutive quarters.
The unemployment rate in Santa Clara County was 2.9% in February and 5.4% statewide.