Office building deal downtown underscores ‘Google bounce’
Group pays $10.6 million for facility that has been leased to a software startup
SAN JOSE >> A building renovation, a tech tenant and the Google effect on downtown San Jose appear to have bolstered a big increase in the value of an office building that’s just been bought by local investors.
A group of realty investors based in the South Bay has bought a small office building at 70 N. Second St. between East Santa Clara and East St. John streets. The building has been leased to Wrike, an up-and-coming software firm.
While the building is one of the smaller ones in downtown San Jose, the deal, according to local property experts, underscores the effect that Google’s proposed transit-oriented community can have on the area’s economy. Google plans a development totaling 6 million to 8 million square feet that would include office buildings, residences, retail, restaurants and open spaces and accommodate 15,000 to 20,000 of the search giant’s employees.
“Every aspect of the market in downtown San Jose is feeling the Google effect,” said Mark Ritchie, president of Ritchie Commercial, a realty brokerage. “Rents, property values, lower vacancy rates, investor interest, they are all being affected.”
In 2015, a group headed up by Chris Freise, managing partner with Lift Partners, a realty firm, paid $3.25 million for the 70 N. Second St. building, according to Santa Clara County public records. The building totals 21,000 square feet. Freise and other Lift Partners executives didn’t respond to a request for a comment.
In the most recent deal, completed April 12, an investment group that includes Jacob O’Sullivan of San Martin, James Taggart and TCT Properties paid $10.6 million for the building, county records show. That’s about three times as much as the sellers paid for it three years ago. The buyers couldn’t be reached for a comment. The sellers also provided the buyers with $5 million as part of the transaction.
“The property values have seen the benefit of the Google bounce, but the Silicon Valley economy is so strong that investing money into assets has caused favorable appreciation,” said Bob Staedler, principal executive with Silicon Valley Synergy.
Lift Partners undertook a considerable upgrade of the office building during its ownership, an upgrade underpinned by a $3.9 million property loan.
“The renovation was as good as you could do with a building like that, which was kind of an old warehouse,” Ritchie said. “It shows there is tremendous value in downtown San Jose buildings.”
In June 2017, Aju Hotels and Resorts, a Korean re-
sorts operator, scooped up the Westin San Jose — more commonly known as the Sainte Claire hotel — paying $64 million for the iconic property. That was a huge increase over the $17 million that the sellers paid for the 171-room hotel at 302 S. Market St.
The 303 Almaden office building, at West San Carlos Street and Almaden Boulevard, was bought in July by Boston-based AEW Capital Management for roughly
$80.2 million. The deal in- volving the 157,000-squarefoot,
11-story office building went for $509 per square foot, believed to be a record price for downtown San Jose offices, topping the previous record of $420 per square foot set in 2015.
In August, the 360 Residences were bought for $133.5 million, a big increase in value from the prior sale of the building, In 2012, the 23-story tower with 213 residential units was bought for $118 million.
“There is a lot happening in downtown San Jose right now,” Ritchie said. “Investors want to be there.”