High-profile project may be Great America's future
SANTA CLARA >> The next chapter for a prime plot of Silicon Valley land beneath what is currently the Great America amusement park in Santa Clara is poised to be a game-changer that might be a decade — or just a few years — in the making.
Prologis, one of the nation's largest real estate firms and a big player in the development of industrial, advanced manufacturing and logistics projects, recently paid $310 million for the land, setting the stage for what could be a major development on what Bay Area commercial property experts say is a choice location.
“This is a golden site,” said Dave Sandlin, an executive vice president with Colliers, a commercial real estate firm. “The door is wide open for that location.”
The 112.6 acres at 1 Great America Parkway in Santa Clara that Prologis bought could be suitable for a wide array of development options, brokers say.
“I would think it would be a mixed-use development site with plenty of residential,” said Phil Mahoney, an executive vice chairman with Newmark, a commercial real estate firm.
Multiple uses could be successful at the site, which has good access to U.S. Highway 101, State Route 237, a light rail line and an ACE train station behind Levi's Stadium.
“Residential would fit well there, office would fit well and retail would fit well there,” Sandlin said.
It's unclear exactly what will ultimately rise on the space and thrill-seekers won't lose the beloved amusement park immediately. As part of the purchase arrangement, Prologis agreed to lease the land beneath the park back to seller Cedar Fair, which could continue to operate a theme park at the site for up to 11 years.
But Prologis wove plenty of flexibility into the leasing part of the deal, with the right to early termination if the real estate titan gives Cedar Fair two years' notice. It's unclear just how long Great America will continue to operate.
There is at least one major challenge that could slow future development of the site: Office vacancies are sky-high in the city of Santa Clara, brokerage firms report. At the end of March, Santa Clara experienced an office vacancy rate of 19.3%, far higher than the 10.6% office vacancy rate for all of Santa Clara County, a first-quarter report by Colliers determined. A jaw-dropping 10.2% of the office space in the city was available for sublease, more than double the 3.7% sublease availability for all of the South Bay, according to the Colliers study.
“Until the office market is ironed out in Santa Clara, Prologis probably isn't going to build office buildings” on the Great America site, Mahoney said.
Two other major development projects already have been proposed in Santa Clara near the Great America site:
• China-based developer Kylli is eyeing a project called Mission Point that features 3 million square feet of office space, 1,800 homes and 100,000 square feet of retail and restaurant space.
• Related Cos. has proposed the development of 5.4 million square feet of offices, 700 hotel rooms, 1,680 residential units and 1 million square feet of retail, food, beverage and entertainment spaces.
“Who knows what will happen with either of these projects,” Mahoney said. “When and until everything is ironed out with these two projects, Prologis will probably bide its time with the Great America site.”
The recent purchase deal also underscores the sharply rising cost of land in Silicon Valley, at least for prime sites.
When Cedar Fair's affiliate bought the site almost exactly three years ago in June 2019 from the Santa Clara Redevelopment Agency, the amusement park company paid $150.3 million, public property records show.
The $310 million Prologis paid represents a 106% increase — more than double — in the value of the land beneath the park at the time of the prior purchase.
“You see that for a lot of investment sales now,” Sandlin said. “The price of land is going through the roof in Silicon Valley.”
At the same time this Santa Clara deal is going on, Prologis, which is a major landlord for e-commerce behemoth Amazon, has pushed ahead with its plans to acquire Duke Realty, another real estate titan.
“Prologis is a very formidable, very talented company that clearly knows what it is doing,” Mahoney said.
Duke Realty is a huge player in the market, developing big industrial, logistics and advanced manufacturing centers. The acquisition is valued at a stunning $26 billion.
“Prologis is one of the best-performing real estate companies of all time,” Sandlin said. “The acquisition of Duke Realty places Prologis in an even stronger position.”