A huge purchase in the ballpark of $100 million for a 276,551-square-foot Class A office complex in San Mateo was recently announced by Harvest Properties.
The two mid-rise towers, called Century Centre I and II, are near the intersection of Highway 101 and State Route 92 at 1400 and 1450 Fashion Island Blvd. Harvest made the purchase with partner LaSalle Investment Management for about $360 per square foot. The seller was Fisher Investments. The location, midway between major employment centers with established technology markets, was key, according to Harvest.
“These neighboring well-established technology markets (San Francisco, Palo Alto, Mountain View and Cupertino) are experiencing increasing rents and tightening vacancy rates,” said Tom Wagner, partner with Harvest in an email. “The property’s strategic location at the intersection of Highways 101 and 92 provides convenient access and great visibility from one of the most important north-south/east-west freeway interchanges in the Bay Area.”
San Mateo County’s vacancy rate has decreased to 11.28 percent from 11.37 percent, this the lowest vacancy rate since fourth quarter 2007 when it was 11.33 percent. The average asking monthly rental rate for San Mateo County is $3.54 per square foot, the highest seen since 2000, according to Colliers International, the commercial and residential real estate services organization. This should stay steady and consistent as it’s projected there will be a continued tightening of the downtown markets, said Rick Knauf, executive managing director for Colliers’ Peninsula office.
Wagner agreed with Knauf and that, in part, is part of the reason for Harvest’s purchase.
“As these markets continue to tighten, San Mateo will continue to see further tenant demand by offering relative value to competing markets coupled with central access to the entire Bay Area,” Wagner wrote.
The sale of this property for this price is not surprising, Knauf said. There also aren’t similar properties on the market now, he said.
“[There’s] very little quality product available,” Knauf wrote in an email. “And the price per foot of $362 is in the ballpark for sales.”
The buyers are planning improvements on select vacant suites, lobby renovations, a new sign program, elevator upgrades and landscaping improvements with the addition of a new tenant-friendly courtyard amenity to replace an existing outdated water feature. Other changes include floor-by-floor restroom, common area and elevator lobby upgrades coinciding with major tenant lease expirations on multi-tenant floors. Harvest also plans to build a new parking structure.
Harvest negotiated three new lease transactions including Apttus, totaling 39,744 square feet, RingCentral, an additional 9,288 square feet, and Sierra Venture, totaling 6,243 square feet, during escrow.
This isn’t the only big grabs along the Peninsula this quarter. Gilead Sciences leased the full building at 101 Lincoln Drive in Foster City for a total of 108,900 square feet. Gilead purchased eight office buildings from Hines Corporate Properties for $91 million for a total of 250,000 square feet at 323, 353-383 and 393 Vintage Park Drive, and 100 and 110 Marsh Drive in Foster City. Additionally, Coupa Software began a 26,200-square-foot lease at 1855 S. Grant St. in San Mateo, according to Colliers.
In this same quarter, Heitman, a real estate investment management firm based out of Chicago, purchased the office complex at 1001-1051 E. Hillsdale Blvd. in Foster City from Harvest and Invesco Real Estate for a total of 398,000 square feet for more than $200 million.
(650) 344-5200 ext. 105