A tech office campus in Santa Clara, located at the intersection of Central Expressway and De La Cruz Boulevard, has been sold for $55.5 million. This transaction highlights the current challenges facing Silicon Valley’s office real estate market, particularly amid rising vacancy rates and buyer expectations for significant discounts. The sale, recorded last Wednesday with the Santa Clara County Recorder, was conducted by LBA Realty, based in Irvine, California, as reported by The Mercury News.
The property, marketed as “@Central” by Newmark, encompasses approximately 298,300 square feet. Currently, around 92,700 square feet of that space is available for lease, contributing to the reluctance of buyers to pay premium prices in today’s market. This sale price reflects a substantial decline of about 43.1% from the $97.6 million the previous owner paid in 2018. Such a drastic markdown underscores a significant shift in office valuations, even for properties that have undergone renovations.
Market Landscape and Property Details
The previous owner of the campus, which underwent a significant renovation by Swift Real Estate Partners, aimed to modernize the property with updated facades and enhanced outdoor amenities. This indicates that the campus is not merely an outdated structure but rather one that has been improved to meet current market demands. Despite these upgrades, the existing vacancy rate has made it difficult to attract tenants willing to pay higher rents.
For potential investors like LBA Realty, the current market conditions have altered the investment strategy. Instead of pursuing rapid gains, many buyers are now focusing on acquiring properties at discounted prices. The goal is to either re-lease the vacant spaces, invest in further improvements, or hold onto the property until market demand rebounds.
Future Prospects and City Planning
The city of Santa Clara’s planning policies have maintained a focus on preserving industrial and office uses along the Central Expressway and De La Cruz corridor. This decision minimizes the likelihood of the campus being converted into residential housing or other large-scale projects in the near future. According to the Silicon Valley Voice, city officials have cited market demand as a key reason for keeping the area oriented towards office and industrial purposes.
The future of the campus now hinges on LBA Realty’s ability to lease the available space and attract quality tenants. The success of this endeavor will determine whether the company can turn the property into a profitable asset or if it will need to wait for an upswing in office demand. As this sale represents a significant data point, it may signal a trend of discounted office transactions that analysts expect will continue across Silicon Valley in the coming months.
