Palo Alto city officials recently announced the city is poised to make the 2015 cap on new office developments permanent in the University Avenue, California Avenue and El Camino corridors. The cap would limit annual office deliveries to 50,000 square feet per year. If made permanent, this would guarantee almost no new competitive products to the Palo Alto Technology Center in the coming years.

“With little to no new supply, office tenants will continue to seek out space in existing Palo Alto properties,” Carroll tells GlobeSt.com. “As an exceptionally well-located highly amenitized asset, Palo Alto Technology Center garnered strong tenant interest during our ownership, and we anticipate that the new owners will enjoy the same success.”

Longfellow plans to convert some of the campus to life science uses and complete capital improvements including facade enhancements, landscaping, and signage. In addition, Longfellow will implement its proprietary services and amenities package, Elevate, which aims to redefine workplaces with lifestyle perks.

“Palo Alto Tech Center's proximity to Stanford University and the world-renowned Stanford Research Park, along with its premier tenancy and desirable physical attributes make it an excellent candidate for Longfellow's signature lab and tech office repositioning,” says Nick Frasco, Longfellow's West Coast managing director.

Greg Cioth, Paul Nelson, Nate Jones and Kurt Chong of Eastdil Secured represented KBS in the deal. Longfellow represented itself.

“We're excited to add Palo Alto Tech Center to Longfellow's San Francisco Bay Area portfolio and expand our presence in one of the nation's most dynamic science and innovation clusters,” says Adam Sichol, Longfellow managing partner.

Longfellow Real Estate Partners invests in life science, lab and innovation space. The purchase is Longfellow's fifth West Coast acquisition since late 2018. The acquisition increases Longfellow's portfolio to more than 2 million square feet on the West Coast and includes Bayshore Technology Park in the Bay Area as well as the Inspire, Roselle and Sycamore campuses in San Diego. Longfellow's total portfolio includes more than 4.7 million square feet of life science and tech space owned and under management in innovation hubs such as Greater Boston, Philadelphia and North Carolina's Research Triangle region.

Silicon Valley's office vacancy rate climbed to 10%, up from 9.3% in the first quarter, according to a report by Cushman & Wakefield. Following a slow yet positive start in the first quarter of 2019, office occupancy took a further step back in the second quarter as net absorption tumbled to negative 448,000 square feet, bringing year-to-date occupancy to negative 160,000 square feet.

New office product under construction across the region currently stands at approximately 5.3 million square feet, composed of 4.4 million square feet of speculative product and 915,000 square feet of build-to-suits. Importantly, most of the 4.4 million square feet of spec is already preleased, says the report.