The risk in the deal for Shorenstein is in keeping the building leased. The law firm has been in the building since it was built 10 years ago but has only two years remaining on its current lease, according to the source. Shorenstein's advantage is that 601 California is one of relatively few buildings in the research park zoned for class A professional office services.

In explaining the reasons for the acquisition, Shorenstein chairman/CEO Doug Shorenstein describes 601 California is a "high quality building with efficient floor plates appealing to single or multiple tenants" located in "one of the premier university-owned and operated centers of innovation in the country…in one of the most supply constrained markets on the West Coast."

The vacancy rate in the 8 million-sf Palo Alto office market is 4.1% on a direct basis and 5.3% on an overall basis, according to fourth quarter research by CB Richard Ellis, while the average asking lease rate ranges from $5- to $6.50 per sf per month. The Silicon Valley as a whole posted an average direct vacancy rate of 9.7% and 11.1% overall in the final three months of the year, and an average asking rate range of $2.88- to $3.50 per sf, according to CBRE.