Goldman, Hines Offer Silicon Valley R&D Campus at 26% Discount

As the Silicon Valley office market show signs of recovery, a transit-oriented R&D campus in Sunnyvale is being offered at a 26% discount to its last trade in 2019.

A partnership between Goldman Sachs and Hines is asking for $140M for the seven-building, 435K SF Sunnyvale Park Place, which encompasses 22 acres at 490 and 510 Guigne Drive and 920-960 Stewart Drive, just off the Lawrence Expressway in Sunnyvale, according to a Green Street alert.

At a $322 per SF price, a buyer’s initial annual yield would be 6.5%, the report said. The partners also are willing to accept separate bids for the East Campus and West Campus at the Sunnyvale campus, which was building 1998. The estimated value of the 206K SF East Campus is $62M, while the West Campus is expected to attract bids of $78M.

The Silicon Valley office market closed Q4 2023 with an overall vacancy rate of 18.6%, net absorption of nearly 499K SF, and an overall average asking rate of $5.47 per SF on a monthly, full-service gross basis, according to a new market report from CBRE.

The positive net absorption in the fourth quarter marked the first quarter of office occupancy gains in the Silicon Valley market since Q2 2022, a big swing from the negative net absorption of minus 1.08M SF in Q3 2023.

The vacancy rate of 18.6% represented an improvement over the third quarter 2023 rate of 18.9%. However, tenant demand for office and R&D stood at 4.3M SF at the end of the year, a 15.7% decrease from demand in the third quarter. The availability rate increased to 21.1% in Q4 from the third quarter availability of 20.9%.

“Overall investor demand for office buildings remains low due to a combination of the unknown future for office space coupled with a freeze in the debt markets,” CBRE said.

“Prominent tech occupiers marketed their underutilized spaces for sublease as they continued to right size. Despite these obstacles, market-ready Class A product continues to draw more interest from smaller office users,” the report said.

CBRE has been tapped to market the listing for Sunnyvale Park Place. According to Green Street, the pitch suggests a that a buyer coming in at a lower basis could offer competitive rents to boost occupancy and earn a higher stabilized yield, with existing tenants and strong weighted average remaining lease term providing stability.

Sunnyvale Park Place is about 60% leased with a weighted average remaining lease term of 5.5 years.

Goldman and Hines paid $188M, or about $436 per SF to acquire the Sunnyvale campus in 2019 from Deutsche Asset Management, when the campus was known as Oakmead West and was 96% leased. The campus is in proximity to a Caltrain station, with two other train stations accessible via a free shuttle that stops at Sunnyvale Park Place.

According to Green Street’s report, Bank of America holds a mortgage on the property and is cooperating with the sale. The deal is not being pitched as a short sale, with the anticipated price expected to cover the outstanding debt.