Angela Swartz/Daily Journal
Tower Plaza, at 2121 S. El Camino Real, recently sold for $41.7 million.
Purchasing commercial property along the Peninsula has been no cheap feat in the past few years and that was proven with the recent sale of Tower Plaza for $41.7 million.
Swift Realty Estate Partners bought the 200,000-square-foot San Mateo building for $15.5 million in 2011. That means its value bumped up from $75 to $208 per square foot in less than three years.
“Timing is everything,” said Mike Cobb, senior vice president of Colliers International’s Peninsula office. “That was a pretty successful repositioning of a building and adding of value to the building.”
Cobb said this points to the fact not much multi-tenant office space is being built anymore. New single-tenant spaces are being built though, he said.
“That kind of product (multi-tenant building space) is more and more scarce,” he said. “So there’s higher demand since there are not a lot of options for tenants.”
Swift did some renovations on the lobby of the 2121 S. El Camino Real location, along with adding other upgrades such as landscaping and lighting changes to add value. The buyer is a joint venture of Scanlan Kemper Bard Cos. and Goldman Sachs. The seller was represented by Steve Hermann, Robert Gilley and Eric Fox of Cassidy Turley in collaboration with Josh Rowell and Jon Mackey of Cornish & Carey Newmark Knight Frank.
Tower Plaza is made up of a 12-story office building surrounded by four smaller office buildings and a five-level parking structure. It also has amenities such as a fitness center, conference room, café and an outdoor recreation area. Major tenants include Gurnick Academy of Medical Arts, New York Life Insurance Company, Aggregate Knowledge, Scale Computing and Selectica. Erik Doyle, managing director at Jones Lang LaSalle in charge of capital markets, said there are about three to six of multi-tenant properties of this scale on the market for sale annually. Jones Lang LaSalle is a company that provides commercial real estate services for tenants, corporations and investors. There are a few others rumored to be on the market soon and he’s hopeful there will be some action in next few weeks, he said.
“More single tenant spaces are being built because they’re the simplest execution,” Doyle said. “In certain cases, they lock down a tenant in advance so it’s easier to finance the building.”
Meanwhile, Will Connor, executive vice president at Jones Lang LaSalle, said the sales price for Tower Plaza was probably so high because overall the market has improved dramatically not just for leasing, but for the capital market.
More investors are beginning to warm up to the mid-Peninsula. The market has seen a significant uptick in sales activity, likely triggered by the growing number of tenant migrations to the area. The long lull in major development ended with a groundbreaking ceremony for Kilroy/Hunter Storm’s 900 Crossings campus in downtown Redwood City, according to a fourth quarter 2013 report by Jones Lang LaSalle.
“With serious interest for space in that project gaining steam, it’s likely that other developers will pull the trigger on their projects once their sites are fully entitled,” the report stated.
Other huge sales are happening along the mid-Peninsula. Cornerstone Properties completed its acquisition of 777 Mariners Island Blvd. for $65 million, or $361 per square foot. The 180,000-square-foot Class A building was owned by Keynote Systems, which negotiated a sale-leaseback. Additionally, Evernote’s headquarters building at 305 Walnut Ave. in Redwood City sold from Walton Street to Menlo Equities for $35 million, or $399 per square foot. Evernote signed a 10-year lease for the entire 87,774-square-foot Class A building in 2012. Meanwhile, 1850 Gateway Drive in San Mateo traded hands from Legacy Partners to Walton Street Capital for $47.2 million, or $341 per square foot. The 138,205-square-foot, Class A building is currently occupied by multiple tenants, including CaféPress, according to the report.
(650) 344-5200 ext. 105