The sprawling Silicon Valley business park that’s home to wearable camera company GoPro is set to be turned into single-family homes, as real estate investors strategize how to contend with record office vacancy rates and a nationwide housing crisis.
Harvest Properties and Stockbridge purchased the 379,615-square-foot Clearview Business Park in San Mateo, California, in an off-market transaction. The firms did not disclose the price of the property, but several media outlets reported it at $102 million. The seller was Goldman Sachs Asset Management, which acquired the business park from Hines in 2018 for $217 million.
The firms plan to re-entitle the 22-acre property at 3000–3155 Clearview Way as a residential development to accommodate 225 for-sale townhomes and single-family homes, 15% of which will be set aside for low-income households.
The deal comes as commercial real estate players in the Bay Area acknowledge that the regional corporate appetite for office space is not likely to return to pre-COVID-19 levels anytime soon. In a press release, the two San Francisco Bay Area companies noted that the Peninsula office market has logged seven consecutive quarters of negative net absorption, according to Colliers.
“Our redevelopment plan responds directly to two regional realities — the ongoing housing shortage and the structural challenges facing the office market,” said Preston O’Connell, a partner at Harvest Properties. “This project represents a higher and better use of the land and aligns with the city’s General Plan goals to build over 7,000 new housing units in the coming years.”
Developers across the country have been working to convert underutilized office and retail space into apartments and other uses, as the national office vacancy rate sits at a historic high of 14.1%, according to CoStar data. Office demolitions and conversions are expected to exceed new construction this year for the first time since at least 2000, according to CBRE.
Different development strategies
The office conversions taking hold across the nation typically involve apartments, though many projects have been delayed or nixed altogether as developers contend with high construction costs and challenges in pivoting office floor plans and infrastructure for residential uses.
Despite leading the nation in office vacancies and housing unaffordability, San Francisco has lagged behind other U.S. cities that have been successful enabling such office-to-housing conversion projects, such as Washington, D.C., Los Angeles and New York, which have hit on creative ways to overcome structural and financial barriers to repurposing commercial property into living spaces.
Now, it appears developers are demolishing office sites altogether for single-family uses, rather than deal with the challenges that come with adaptive reuse.
Harvest and Stockbridge are expected to demolish the six office buildings at 3000–3155 Clearview Way. Several of those buildings are leased to GoPro through 2026. The campus was built in 1973 and previously served as Visa International’s headquarters. GoPro moved in in 2011.
It's not the first for-sale residential conversion of an office park for Harvest. The firm in 2019 paired with Invesco to buy an aging office complex in San Mateo and entitled the site for townhomes. It has since sold parcels to builders including PulteGroup, which has opened a for-sale housing project totaling 156 units at the site.
Housing shortage
The wider San Francisco office market has continued to gain momentum, thanks to a flurry of leasing among artificial intelligence startups in particular, with leasing activity ratcheting up over the past year to levels last seen during the 2010s tech boom. CoStar noted that it will nonetheless “take many years to reduce the massive quantity of available space in the local office market," and therefore, “the prospects for rent growth are subdued.”
On the other hand, San Francisco now has the highest annual residential rent growth in the nation, while the San Mateo/Burlingame submarket at the northern end of Silicon Valley has seen gradually rising rents, with new developments leasing out quickly.
While the Bay Area, like the rest of California, is suffering from a chronic housing shortage, new developments have stalled in the region recently due to high costs, permitting delays and interest rates. Real estate industry professionals say one solution is pivoting to townhouses or single-family homes that tend to cost less to build than apartment buildings and can be put on the market piecemeal as they’re completed.
Harvest and Stockbridge said the conversion project is expected to provide homes for up to 700 residents spanning multiple income levels and will play a key role in addressing the region’s jobs-housing imbalance.
Between 2010 and 2016, San Mateo County added some 79,000 jobs but only 3,844 housing units, according to data on the county’s website.
“Projects like this are rare, but they’re essential to expanding the for-sale housing supply and creating opportunities for current and future San Mateans,” said Tyler Issadore, senior director at Harvest Properties.