A retail property occupied by Whole Foods Market recently sold for $55 million in Los Altos.
LOS ALTOS, CA—Silicon Valley continued to record employment gains in the second quarter, though at a slower pace due to several factors including a market at full employment, slower in-bound migration due to the cost of living and M&A activities. Nevertheless, tech companies in particular are still looking to expand in the Bay Area due to the sheer depth of talent here.
According to the California Employment Development Department, the unemployment rate in the San Jose metro area was 2.8% at mid-year, a 70-basis-point decrease from last year's reading of 3.5%. Overall employment rose by 34,800 jobs or 3.2% year-over-year, which brought the total to more than 1.1 million non-farm payroll positions as of May 2018. The median household income in Silicon Valley continued to be the highest in the country at $118,100, a 3.8% increase year-over-year.
This record-high income and employment should boost shopping activity in the area, according to a mid-year report by Cushman & Wakefield. Silicon Valley's retail vacancy rate increased slightly to 3.9% in the second quarter of 2018, up 20 basis points from 3.7% in the first quarter. However, this is still below the 4.6% rate of one year ago.
The current rate translates to 1.5 million square feet of vacant retail space, an increase from 1.4 million square feet in the first quarter. Most of the available space, however, was class B or C product.
Santa Clara recorded the lowest vacancy rate in the region at 1.9%, followed by Palo Alto/Mountain View/Los Altos with 2.6% vacancy rate. Sunnyvale/Cupertino had an uptick in its vacancy rate from 2.8% last quarter to 3% in the second quarter, mainly due to two sublease stores totaling 9,000 square feet coming to market: McClellan Square at 10465 South De Anza Blvd. and 1039 Sunnyvale Saratoga Rd. San Jose/Campbell/Los Gatos, Milpitas and Morgan Hill/Gilroy recorded 4.3%, 4.4% and 4.9% vacancy rates, respectively.
With almost no new construction deliveries, the increase in vacancy translates to 87,000 square feet of move-outs in the second quarter. The San Jose/Campbell/Los Gatos submarket had the greatest volume of negative absorption at more than 125,000 square feet. One significant closure was Sears at Westfield Oakridge in South San Jose, part of the 250 Kmart and Sears stores national closures.
Santa Clara, Morgan Hill/Gilroy and Palo Alto, Mountain View/Los Altos recorded positive absorption of 53,000 square feet, 22,000 square feet and 16,000 square feet, respectively.
In the thick of it is a 50,451-square-foot retail property occupied by Whole Foods Market in Los Altos, which recently sold for $55 million. Imperial Hornet Developers LLC acquired the freestanding property located at 4800 El Camino Real, one of the region's primary thoroughfares, from Compass Grand Associates LLC.
Investment specialists Kevin Held and Matt McNeill with Cushman & Wakefield represented the buyer in the transaction. The duo worked with Ron Goldie, a Los Angeles-based attorney who specializes in acquisitions, portfolio management and dispositions, and acted as an investment advisor in leading negotiations for the buyer.
“Urban in-fill, generational triple net assets leased to top-tier credit tenants in the nation's top markets continue to be in high demand with very limited supply, and many transactions occur off-market like this sale,” Held tells GlobeSt.com.
Situated on 2.41 acres, the building provides high-visibility frontage along heavily traveled El Camino Real. Located at a signalized intersection, it also allows entry from both directions of traffic. The store features dual entry on the ground floor, as well as two levels of subterranean parking.
“The property was originally developed as a prototype build to suit for Whole Foods in an area with extremely high barriers to entry and strong market fundamentals,” said Held. “This is an irreplaceable, single-tenant asset and a generational investment opportunity in the epicenter one of the best economies in the world.”
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
