The Silicon Valley office market is still stumbling along its road to recovery, but one local landlord is testing the waters with a listing for a building leased entirely to Amazon.
MDY Properties, the owner and developer behind the Thirty75Tech office development in Santa Clara, California, has put the 3075 Olcott St. property up for sale. The listing will serve as a litmus test for how powerful Amazon's tenancy is in terms of landing a buyer willing to bet on the tech-concentrated region's post-pandemic rebound.
Cushman & Wakefield has been hired to help market the nearly 247,000-square-foot building, one of the newest projects to be constructed in the Silicon Valley area since its completion in the earlier years of the pandemic.
Given its role as one of the most concentrated tech hubs in the world, Silicon Valley's office market has been especially hard hit by the industry's widespread downsizing and weakened demand in the aftermath of the pandemic. The region's vacancy rate of 15.8% is at its highest point in 20 years and is higher than the nation's vacancy rate of 14%, according to CoStar data.
The property includes what could be an especially attractive draw given Amazon's long-term deal for the building. The Seattle-based retailer initially signed a prelease for about 85,000 square feet when the Thirty75Tech project was still under construction. Less than a year later, it tacked on the additional 160,611 square feet to become the building's sole occupant as part of a deal that isn't scheduled to expire until September 2032.
Pricing details or expectations for the property have not been publicly disclosed. Neither San Mateo, California-based MDY Properties nor the Cushman & Wakefield brokerage team responded to CoStar News' requests for comment.
Mounting appeal
Sales of single-tenant, tech-leased properties have long played a significant role in helping to prop up Silicon Valley's investment activity. Tech tenants, including Apple, Alphabet's Google and Meta, provided a source of reliability and certainty for investors in an otherwise turbulent market, and properties with long-term leases in place have commanded some of the highest prices in the South Bay area.
However, the pandemic's lingering impacts, coupled with many tech companies' efforts to downsize their real estate portfolios, have meant some buyers have remained on the sidelines as they wait out any market uncertainties.
Leasing activity across the tech-concentrated region has fallen to lows comparable to the Great Recession. While the amount of sublease space has fallen, there is still more than 5.3 million square feet weighing down the market and further complicating any sense of a recovery.
Yet with Amazon's long-term tenancy in the building, the Thirty75Tech listing could serve as a benchmark for the market's valuation rebound as it tries to rebuild some of its pre-2020 momentum.
Office deals across the Silicon Valley area remain depressed compared to their pre-pandemic levels of activity and pricing, but those lower valuations are opening the door for smaller investors or tenants who are eager to take advantage of the discounted opportunities.
LinkedIn last month closed a $74 million deal to purchase a 120,000-square-foot property in nearby Sunnyvale, cementing its presence in the tech-concentrated hub and lending a boost of optimism that some big tech companies are gradually reverting back to office expansions after years of severe real estate cuts.
Global chipmaker Nvidia has also been scooping up large blocks of space across the San Francisco Bay Area, most recently with its $123 million purchase of 2348 and 2350 Walsh Ave., an office park just down the street from the MDY listing.