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Commercial Real Estate Blog

A Thought on Cupertino Square

When investors took over the old Vallco Mall a few years ago I was hoping that the project would be rebuilt from the ground up. The fact that some of the outparcels (including Sears) were not part of the deal made that an unlikely event and instead the mall underwent a major renovation which has so far included a new parking garage, several new restaurants, and a AMC Theatre.

As the popularity of Santana Row has grown it seemed logical that the redevelopment would encompass a design which was cognizant of the Santana Row “format”. Based on what I’ve seen to date I think Cupertino Square will be a convenience location as opposed to a destination, which is what Santana Row has successfully positioned itself to be. I’m reserving final judgement until the remaining development takes place but it seems at this junction the importance of thoughtful tenant selection and leasing will drive the ultimate success of the project.

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Options Being Explored for San Jose’s Old City Hall

After sitting vacant for nearly two years, the City of San Jose is beginning to more seriously explore its options for the site. The city is currently exploring a potential sale of an approximately 7.5 acre site for high-density residential use. In addition, the old city hall which sits on roughly 10 acres is also anticipated to be in play.

Whether the properties end up getting redeveloped into residential remains to be seen however as the County might end up being a contender for the project. In addition, the court system is also in the hunt for land to develop and though slightly out of the way, the site could also be something they consider.

What Does NNN (Triple Net) Mean in Commercial Leasing?

In a commercial leasing, rents are often quoted as being NNN or Triple Net. What this means is that in addition to the quoted rental rate, the tenant, under the lease, is responsible for their share of the operating expenses and real estate taxes associated with the property, in addition to the tenant’s own janitorial and utilities.

NNN refers to Maintenance, Insurance, and Taxes. Maintenance generally covers the maintenance of the property, including landscaping, common area utilities, and property management. It is important tenant’s understand the operating expense clause in their lease to know exactly what costs the landlord is capable of passing-through. Insurance refers to property insurance (this is seperate from tenant’s general liability insurance), and Taxes refers to tenant’s proportionate share of the property taxes.

Because different landlord’s might include or exclude certain expenses from their definition of NNN, it is important to ask the question so as to be able to accurately predict operating expenses. It is also important to ask for historical operating expenses to understand if there has been any deferred maintenance or abnormal expenses associated with the property that could impact the expenses going forward.

Amgen Shedding 365,000 SF of Space in South San Francisco

In response to a reduction in forecasted revenues, Amgen is offering for sublease 365,000 Square Feet of R&D and Office Space in South San Francisco. The space is spread across three properties, one of which is in shell condition. The other two spaces are currently under construction and will be available sometime in 2008.

While most of the stories we read and hear about now involve bullish leasing activity, the reality is that there still are opportunities out there to sublease space from companies downsizing and reorganizing and tenant’s should not lose sight of this reality.

Dot Com Redux? Some Lease Deals Involving Equity Again

Some companies are beginning to offer equity to their landlord’s in lieu of rent. This certainly is not a common occurrence in the marketplace, but there are some reports floating around that some deals are again involving options and/or grants.

Back in the late nineties companies were often required to give up grants or options to get into space. While the market is not as tight as it was back then, there are some markets that have vacancy rates in the low single digits. If vacancy rates continue to fall we will likely hear of more and more deals involving stock grants but we don’t anticipate that this will become the norm in deals as many landlord’s still have a relatively fresh recollection of what happened to many of the grants they got back in the late nineties.

OfficeSnapshots.com provides a glimpse into the offices of popular companies

Ever wonder what a company’s office looks like? Looking for ideas for your own office? A recently launched blog, Office Snapshots provides a look into the offices of companies such as Craigslist, Digg, Meebo, and Pixar with more companies being added often.

Back during the late 90’s there was lot of extravagant spending taking place building out and furnishing corporate digs. Now that startups and companies have figured out how to build apps and software for a fraction of what it cost in the late nineties, it seems they’ve also found cost efficient ways to outfit many of their offices on the cheap while retaining the cool factor.

Mission West Properties Deal Scrapped

Last week I wrote a few posts about the tightening of credit and the impact that would have on lending standards and ultimately prices and cap rates. I indicated that the deal by Starwood Capital (rumored) to purchase Mission West Properties for $1.8B might come under pressure.

It seems the tightening of the credit belt by the first and second lenders for the deal has lead the deal to collapse. The company will likely still try to find a suitor but I anticipate the acquisition price to be lower than the $1.8B that was previously agreed to as part of the failed deal.