Lowe Enterprises JV Buys R&D Asset in Sizzling Silicon Valley
- Oct 11, 2016
By Barbra Murray, Contributing Editor
San Jose, Calif.—Lowe Enterprises Investors doesn’t waste time. In a joint venture with Vista Investment Group, LEI recently acquired the Silicon Valley office/R&D building at 2581 Junction Ave. in San Jose, Calif., and concurrent with the purchase, inked a deal for Thinfilm Electronics Inc. to lease the entire 92,900-square-foot property for its U.S. headquarters.
The joint venture acquired the asset from Qualcomm MEMS Technologies Inc., which had begun its occupancy of 2851 Junction before purchasing the building in 2008 for $20 million. LEI is not revealing the financials of its transaction, but concedes that coming by such a property is no simple feat, and clearly not a cheap one either. “The market for deals remains highly competitive, so finding transactions that are priced to hit our desired risk profile and targeted investment objectives remains challenging,” Alan Chamorro, senior vice president with Lowe Enterprises, of which LEI is an affiliate, told Commercial Property Executive.
Located on an approximately 5-acre site in North San Jose, 2851 Junction was originally developed in 1984. Time, however, has been kind to the property, due in no small part to $80 million in upgrades over the years. Today, the two-story office and laboratory building’s offerings include a cutting-edge, 22,000-square-foot cleanroom. Thinfilm will relocate its current U.S. headquarters from the NFC Innovation Center, located at 2865 Zanker Road in San Jose, to Junction Avenue in the first quarter of 2017. Aside from planned tenant improvements to the office space segment of the structure, Thinfilm got just what it wanted, and it felt no pain in the process.
“Despite the fact that we were looking for a very unique type of facility, finding the property was relatively easy,” Bill Cummings, senior vice president of corporate communications with ThinFilm, told CPE. “We did some initial legwork in partnership with the City of San Jose. Then we engaged with a couple of third parties in the commercial real estate field that specialize in advance technology manufacturing facilities. That led to a discussion with Lowe Enterprises, which eventually purchased the building from Qualcomm. It all happened in a relatively short amount of time. We were very fortunate to find such a highly suitable building so close to our current space.”
A tenant’s smooth road to the right industrial space in San Jose or anywhere in Silicon Valley these days is the exception, not the norm. According to a report by commercial real estate services firm CBRE, the average industrial vacancy rate in the second quarter dropped to a record low of 1.4 percent—and that’s with a tempering of demand. A mere 410,000 square feet remained available. An investor’s dream.
“While leasing demand and velocity have slowed somewhat from earlier in the year, the Valley appears to remain healthy,” Chamorro added. “For high-quality, well located properties over the near-term, the outlook is generally positive from the perspective of both investment capital, and tenant demand.”