BEST BUY SITE PITCHED AS FUTURE OFFICE SPACE
SAN JOSE » The Best Buy store in San Jose’s Santana Row, a prominent fixture on Stevens Creek Boulevard, is being marketed as office space — potentially to a tech company — but the retailer can still exercise lease options to remain in the space.
As digital commerce continues to squeeze brick-and-mortar retail, the prospect that the Best Buy site could be converted to offices in a choice San Jose spot was revealed in a flier circulated by CBRE, a commercial realty firm. The two-story retail building is located at one of the busiest intersections in the BayArea, StevensCreekandWinchester boulevards.
The availability of theBestBuy site is a freshindicator of the challenges faced by physical store retailers as they combat foes such as Amazon, eBay and a host of other online merchants.
Still, it’s possible Best Buy may seek to remain entrenched in its current high-profile spot. The retailer has two five-year options that could extend the lease until early 2029. But the first of the two five-year options begins in January 2019, soon after the 2018 Christmas shopping season concludes.
“This is a wonderful location for us,” said Jeff Shelman, a spokesman forMinnesota-based Best Buy. “It’s an important placewhere we want to be.”
CBRE brokers Shane McNulty and Michael Grado are marketing the 60,000-square-foot Best Buy store as an office building among The Offices at Santana Row. Federal Realty is the developer and principal owner of Santana Row, a mixed-use development of stores, restaurants, residences, offices and a hotel.
“SantanaRowis turningabigbox retailer into a wonderful space with exposure and identity on a legendary corner in San Jose,” said Dion Campisi, a senior vice president with Colliers International, a commercial realty firm.
The CBRE flier touts outdoor collaborative areas, 33 stores, 35 restaurants and cafes, three parks and multiple courtyards with outdoor seating, all in Santana Row. The flier also noted other amenities such as the new Soul Cycle fitness center and a full-service gym in the development.
“Retail square footage is shrinking all over,” said David Livingston, aMilwaukee-based retail analyst. “Stores like are looking to scale back and sublease space. Mall vacancies are growing.”
During the 12 months that ended in February, Best Buy closed 18 largeformat stores, Corie Barry, the retailer’s chief financial officer, saidduring a conference callwith analysts onMarch 1. In addition, Best Buy has decided to close all 257 of its small-formatmobile phone stores. Overall, though, analysts believe Best Buy is surviving nicely in a challenging environment for physical retail sites.
“We benefited from the exit or decline of certain competitors,” Hubert Joly, Best Buy’s chief executive officer, said during the conference call.
Best Buy also noted its comparable store sales rose 5.6 percent during the 12 months that ended Feb. 3 — a huge jump over the small increases in comparable sales in the 2015-17 fiscal years. The possible conversion of the Best Buy store in Santana Row comes at a time when tech companies hunger for big office spaces in the Bay Area and Silicon Valley. Google, Facebook, Apple, Amazon, Microsoft and others, through a combination of office leases and property purchases, have grabbed a growing number of sites for expansion in the nine-county region.
“I picture a tech office user going in thatBestBuy space,” Campisi said. “The building has great exposure, high ceil- ings; it would be a good opportunity for a tech company.”
Splunk and Broadsoft are among the tech companies now located in Santana Row. Federal Realty also has begun construction on a new office building on OlsenDrive that totals 284,000 square feet.
“It would be a great site for a tech company,” said Mark Ritchie, president of San Jose-basedRitchie Commercial, a realty brokerage. “The300SantanaRowoffice building across the way has been wildly successful.”
CBRE also appears to be attempting to market the Best Buy site as being part of a kind of village at Santana Row. CBRE brokers didn’t comment for this report. A Loopnet listing for the property at 3090 Stevens Creek Blvd. said the site would be available starting in the first three months of 2019.
“Be part of the small town feel of Santana Row,” the flier states.