Square Feet

The latest “big news” is that Brocade is in negotiations to lease the Phase I buildings of Hunter/Storm’s office project located at the SEC of 237 and First Street. The project entails 4 Class A office buildings totaling 880,000 SF, approximately 250,000 SF of retail, a hotel, a 25,000 SF health club, and a 168-key hotel.

The 36.6-Acre property was purchased by Hunter/Storm from Palm in Q3 of 2006 for $70,000,000 or $43.90 per square foot. The purchase and contract for the sale can be viewed here.

The first phase of the office development will entail about 436,000 SF of retail making it an ideal fit for Brocade, who occupies about 405,000 SF across several buildings located at the San Jose Airport. It’s leases for those spaces expire around Q2-Q3 of 2010. A warm shell is expected to be ready for tenant improvements in Q3 of 2009 making the deal attractive for Brocade from a timing perspective.

Originally the retail portion of the center was anchored by a Target. Those plans seem to have fallen apart, perhaps at the request of Brocade who likely is not to keen with such an intensive retail use, and would likely prefer a more lifestyle-centric retail component to the project.

If this deal happens it will likely be one of the larger deals to be concluded this year and will bring some reassurance to valley landlords, some of which who have gotten a bit nervous given the uncertainty in both the leasing and debt markets. Still though, this deal seems to indicate that Brocade is simply substituting space and not growing, and therefore likely to result in 400,000 SF of additional vacancy in the San Jose market.

Boston Properties has closed on their purchase of North First Business Park in San Jose. The park is comprised of eight office and R&D buildings totalling 367,000 square feet on 24 acres of land. The seller was an affiliate of Goldman Sachs.

The property is bound by Zanker Road, Daggett Drive, and First Street. Boston Properties’s plans for the property are to redevelop the site into approximately 1.4 million square feet of Class A Office Space.

The park is mostly vacant and it is unclear when Boston intends on redeveloping the site, but it should be noted that a large number of parcels of property have changed hands in the North First Street area recently, and most of the properties include plans to redevelop into Class A office space. It will be interesting to see if the forecasts for Class A space demand will mesh with all the developers who intend on delivering millions of square feet of such space over the next 2-4 years.

Atmel is also currently marketing its headquarters and an adjacent 11 vacant acres of land for sale. The company likely intends on relocating into a smaller Class A headquarters environment somewhere along the 101 corridor in Santa Clara, San Jose, or Milpitas.

As the city of San Jose gives the go-ahead and developers push on with residential projects in San Jose, Oakland is beginning to see constructions halts and plans being shelved.

The Olson Co. has halted construction on its 252 Unit, 7-Story CityWalk project in Oakland about half-way through construction. According to a BizJournal article, the developer has not been paid and has filed suit.

In San Jose, the Foster Group has put up a six-acre high-density housing site on the market for sale. The site can support in excess of 500 residential units. On the market for less than two-weeks, two dozen buyers have expressed interest.

In addition, Fairfield group has received the cities blessing for approximately 900 residential units across two projects in North San Jose, one at Tasman and Zanker, and the other at Baypointe near Tasman.