A mixed-use office and retail complex within the redeveloped Bay Meadows racetrack site south of San Francisco has sold for $175 million, in the latest example of how the Bay Area’s office market continues to regain momentum.
San Francisco-based Shorenstein Properties nabbed the three-building Park Place at Bay Meadows, a development consisting of two Class A office buildings, 1100 and 1200 Park Place, and a grocery-anchored retail shopping center at 1010-1060 Park Place. The buildings total 258,000 square feet in the tidy suburb of San Mateo, a community sandwiched between San Francisco and Silicon Valley that’s become a hotbed of residential development.
The seller was JP Morgan, which listed the fully leased complex for sale in January for the same price it ultimately got for the portfolio property. The bank bought the property in 2018 for an undisclosed price. Before that, it changed hands in 2007 for $152 million.
Trophy properties in prime locations have attracted strong interest among tech tenants and premium pricing, even as office valuations in the region remain well below pre-pandemic levels.
The buildings are nestled within the master-planned Bay Meadows community, a mixed-use, transit-oriented development just feet from the San Francisco Bay. Owned by Stockbridge Capital Group and developed by Wilson Meany, Bay Meadows is ultimately slated to add around 1,100 homes, 780,000 square feet of office space, 18 acres of parks, a private high school and 40,000 square feet of retail on the tech-focused San Francisco Peninsula.
The office building at 1100 Park Place sold for $85.7 million, or around $583 a square foot, while 1200 Park Place sold for $40 million, around $655 a square foot. Office valuations in Silicon Valley have generally remained well below pre-pandemic levels, and institutions and real estate investment trusts have largely stayed on the sidelines, according to a CoStar market report.
Video game tenant
The retail center at 1010-1016 Park Place, which is anchored by Whole Foods, sold for around $48.3 million, or about $991 per square foot. Outdoor malls anchored by grocery stores have been particularly sought after by investors, as flexible work schedules since the COVID-19 pandemic have spurred more traffic to neighborhood retail centers throughout the day.
On the office front, the Park Place complex is home to video game developer Zynga, which runs its headquarters out of most of the 62,000-square-foot 1200 Park Place building. The main tenant at 1100 Park Place is real estate firm Essex Property Trust.
Video game developer Roblox is headquartered elsewhere in the Bay Meadows business park. The company garnered attention for expanding into more than 500,000 square feet within the development in recent years.
“In San Mateo, the signing of new leases by growing companies like Roblox has brought a positive shift to leasing activity,” observed a recent CoStar analysis, which noted that “the wider San Francisco office market has continued to gain momentum, with leasing activity ratcheting up over the past year to levels last seen during the 2010s tech boom.”
Shorenstein has been described by officials as an "active buyer of top-tier office assets over the past year," with over $1 billion in closed transactions and "several additional acquisitions under contract.” This summer, the firm purchased a high-end office tower in Dallas' upscale Preston Center neighborhood, with proximity to the city's most expensive homes; that was its second office property acquisition in the market in the past year, after it acquired International Plaza II in North Dallas.
The company did not immediately respond to a request for comment on the Bay Meadows deal from CoStar News.
San Mateo activity
The sale comes as the Bay Area’s commercial real estate market has split in two directions, with older office assets remaining half-empty or worse in the face of remote work trends, while trophy properties in prime locations continue to command strong interest and competitive prices.
In the last decade, the formerly sleepy suburbs near San Francisco International Airport have become increasingly alluring to renters. The San Mateo/Burlingame area — the second-largest apartment submarket in the San Francisco metro area — has gradually raised its status compared to neighboring cities, bringing apartment rents and values closer to the San Francisco average.
One of the region’s largest redevelopments aims to replace the city’s Hillsdale Shopping Center, most of which dates to the 1980s or earlier, with a mix of retail, office space and about 1,400 apartments. A redevelopment plan at 678 Concar Drive would create around 869 residential units plus commercial spaces. And developer Mecah Ventures has pitched a 14-story luxury high-rise in downtown San Mateo to appeal to empty nesters who are looking to downsize without moving too far from civilization.
Many of the street and community names in the Bay Meadows development were picked in tribute to the thoroughbred racetrack it replaced. The track was built in 1934 and hosted some of the most famous horses in the sport, including Seabiscuit, Citation and Coaltown. Its last race was in 2008.