Upgrades in Store for Peninsula Office After Purchase
In a purchase representing Meridian’s largest general office deal to date and its first general office acquisition in the mid-Peninsula submarket, the firm recently closed on a six-story 100,000-square-foot office building.
SAN MATEO, CA—In a purchase representing Meridian’s largest general office deal to date and its first general office acquisition in the mid-Peninsula submarket, the firm recently closed escrow on a six-story 100,000-square-foot office building located at 1300 South El Camino Real. The seller was DivcoWest and the purchase price was undisclosed.
Meridian plans to update the building with common area and creative suite upgrades.
“I am excited about completing the work started by DivcoWest to create tenant spaces that are modern, creative and foster collaboration among teammates. We will have the opportunity to apply our core competencies in project and asset management to execute the business plan on this asset,” John Pollock, Meridian CEO, tells GlobeSt.com.
The 72%-leased building is located near downtown San Mateo.
“We purchased this asset as part of our value-add office investment strategy,” said Awais Mughal, Meridian senior vice president. “This is a high-quality asset that has been well maintained by a sophisticated and strategic owner. The building has flexible floorplates that can accommodate many different-sized tenants. Downtown San Mateo is becoming more attractive to tenants given the transportation options and amenities located nearby.”
Mughal points out that this purchase reinforces Meridian’s commitment to strong submarkets in the Bay Area such as the mid-Peninsula submarket.
“We believe that this submarket will continue to perform strongly,” he says.
Constructed in 1987, the building sits less than one mile south of downtown San Mateo with access to the 101 and 92 freeways. Current major tenants include Charles Schwab, LendingTree and the Silicon Valley Community Foundation.
“We plan to renew existing rents and to lease up the remaining available space,” Mughal said. “We will proactively improve vacant spaces to create attractive, creative suites for prospective tenants. We also plan to upgrade common areas and restrooms, and work with the city to provide exterior building signage for future tenants. We will also upgrade monument signage to enhance the building’s identity.”
Tyler Meyerdirk, senior managing director of Newmark Knight Frank in San Francisco represented both the buyer and the seller in the transaction.
“This was an opportunity that was presented to us based on our reputation in the industry. Our expertise in acquisition, construction and development is a key competitive advantage for assets that require value-add,” Mughal tells GlobeSt.com.
This transaction comes on the heels of Meridian’s purchase in Santa Ana, CA last week where the firm purchased a 100% vacant 53,500-square-foot office building for $20.35 million with plans to convert it to medical use. According to Mughal, Meridian is actively looking for additional general office and healthcare real estate opportunities of all sizes throughout California, the Pacific Northwest and the Southwest.
Meridian is especially focused on expanding its office footprint in the Bay Area, which it considers one of the strongest office markets in the country, says John Moutsanas, Meridian senior vice president.
“We will continue to look for high-quality, well-located office assets throughout the Bay Area and we intend to increase the volume of traditional office acquisitions when compared to our historical appetite,” said Moutsanas.
Vacancy rate across all product types took a minor dip from 4.3 to 4.2%, according to Colliers International. The average office asking rate fell from $5.95 to $5.88 per square foot. However, the lease rates for R&D and industrial product rose with the industrial average asking rate of $1.87 NNN seeing the strongest rise quarter-over-quarter. Office net absorption is at negative 438,446 square feet, up from negative 444,698 square feet last quarter. San Mateo continues to lead the submarkets on the Peninsula in net absorption, finishing the quarter at 69,855 square feet, says Colliers’ most recent report.