Big north San Jose deal points to hot Silicon Valley market for mid-sized firms
Central Park Plaza sells for $83.8 million
SAN JOSE >> The sale of a big office complex in north San Jose could signal a refuge for modestly sized corporations who have been squeezed in the past year by tech titans such as Google, Facebook, Apple and Amazon.
Central Park Plaza was bought for $83.8 million by an affiliate of Los Angeles-based realty investment firm Preylock Real Estate Holdings, Santa Clara County property documents show. The buying entity, Preylock SJC,
purchased the six-building office complex on Aug. 30 from an affiliate of Transwestern Investment Group, a realty investment company, according to the county records.
Although the site could be transformed into a modern tech campus, as large as 1.5 million square feet, Preylock’s deal more likely shows Central Park Plaza commands value as a location for smaller companies. With its six buildings ranging in size from 43,000 square feet to 57,000 square feet, the complex isn’t the usual property type that
has been part of the headspinning shopping spree for office sites in Silicon Valley by the tech titans, local realty experts pointed out.
“Central Park Plaza has options for those smaller tenants that are having trouble finding office spaces with all the big deals that are happening,” said Chad Leiker, first vice president with Kidder Mathews, a commercial real estate brokerage.
The big tech companies in the region often seek to occupy single office buildings that are as large, or even larger than the entirety of Central Park Plaza’s 301,000 square feet.
“Google, Facebook, Apple and Amazon primarily want to look at large chunks of office space,” said Dave Sandlin, a senior vice president and principal executive with Colliers International, a commercial real estate brokerage. “All of this activity increases the value of just about all office buildings in Silicon Valley.”
In 2016, Transwestern, acting through affiliate TSP Central Park Plaza, paid roughly $68 million for the north San Jose office complex. The August purchase by Preylock represented a 23 percent jump in value in just over two years.
“The sellers put some money into upgrading the property to position it so they could attract companies from the Peninsula,” Leiker said. “They have successfully
brought in tenants with a decently priced product, an improved image and more of a high-tech feel.”
Still, a growing number of tech tenants hunger for ultra-modern offices that they can use to dazzle and entice recruits, as well as retain existing talented employees. That means owners of even a nicely upgraded property such as Central Park Plaza might be hard pressed to keep up with new office projects.
As a result, it’s possible that the true value of Central Park Plaza, with its frontage on Zanker Road, Plumeria Drive and Junction Avenue, could be unlocked by a project that would bulldoze the existing buildings and replace them from scratch.
“The new owners might want to get the site entitled for 750,000 to 1 million square feet,” Sandlin said, adding that as much as 1.5 million square feet wouldn’t be out of the question on the property.
Plus, with a crop of current tenants that produces steady cash flow from rents, the owners can take the time to navigate the San Jose planning department’s entitlement process.
Preylock executives couldn’t be reached for comment.
“It’s better to create a high-end product at the site,” Sandlin said, “rather than try to spend a fortune on more renovations and not get enough of a return on the investment.”