SUNNYVALE — A huge Sunnyvale tech campus has been bought for roughly $100 million in a deal that shows interest in Silicon Valley real estate — yet also underscores the Bay Area office market’s feeble state.
The seven-building tech complex in Sunnyvale was bought for $100.8 million by an affiliate linked to Tidewater Capital, according to documents filed on June 3 with the Santa Clara County Recorder’s Office.
Sunnyvale tech campus consisting of seven office buildings near the corner of De Guigne Drive and Stewart Drive, shown within the outline. Boundaries are approximate. (Google Maps)
To be sure, the property deal shows that veteran real estate firms such as Tidewater Capital continue to show interest in commercial real estate sites in Silicon Valley.
Yet the purchase also is a reminder that the Bay Area office market totters at the edge of an economic abyss of plunging values, faltering rents, rising foreclosures, sky-high interest rates, and tough financing markets.
490 De Guigne Drive, an office and research building that is part of a seven-building tech campus in Sunnyvale. (Google Maps)
In 2019, the seven-building campus was bought for $188 million. The office and research complex for the complex totals 431,100 square feet.
At the time, the property’s price was seen as evidence of the bustling state of Silicon Valley’s office market.
Tech companies were expanding rapidly and seemed to be hiring new employees as fast as recruits could fill out applications.
Silicon Valley’s employment boom unleashed a ravenous appetite for office space to accommodate the fast-growing tech workforce.
Then the arrival of the coronavirus spawned economic afflictions and business lockdowns starting in 2020 that emptied out office buildings.
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By early 2023, it became clear the corporate appetite for office space had waned greatly, even after the end of COVID restrictions had ended, clearing the way for a return to the office.
Even worse, tech layoffs descended on the Bay Area, further weakening the demand for offices.
In early 2024, the selling group, an alliance of Wall Street leviathan Goldman Sachs and respected and veteran real estate firm Hines, began to scout for prospective buyers.
Goldman Sachs and Hines originally attempted to sell the property for $143 million, 24% below the 2019 price.
The final price of $100.8 million was a jaw-dropping 46% below the property’s purchase value just five years ago.
This example of weak values for office properties and other commercial real estate is hardly unique in the Bay Area.
In San Francisco, some big office buildings are selling at steep discounts of as much as 90% compared with their prior values. Foreclosures haunt other office buildings. Some hotels, including one on famed Nob Hill, have been returned to their lenders.
In perhaps the highest-profile commercial real estate failure in San Francisco, a big shopping mall on Market Street that’s now called Emporium Centre San Francisco, was given back to its lender. The mall emptied as tenants fled, including the upscale Nordstrom store.
In Oakland, multiple office buildings have either been returned to their lenders or are in varying stages of default on their failed loans.
In downtown San Jose, office values have plummeted, as shown by deals involving of two big office properties.
One office building at 303 Almaden Boulevard sold in December 2023 for 70% below its prior price. In February 2024, a two-building office complex at the corner of West St. John Street and North Market Street was bought for a 77% reduction from its previous purchase value.
In the wake of the Sunnyvale office campus purchase, the next big questions involve Tidewater Capital’s strategy for the property.
The seven-building campus is deemed to be located in one of the most attractive office markets in Silicon Valley.
Housing might also be on the table for the campus, which totals 21.4 acres. More developers have proposed converting existing Bay Area office properties into housing projects.
