Broadcom’s offer for VMWare sets stage for office consolidation

Tech outfits combine for more than 2M sf, including two buildings in Irvine

Los Angeles /
May.May 26, 2022 02:30 PM
VMware’s Raghu Raghuram and Broadcom’s Hock Tan with 3401 Hillside Drive and 250 Innovation Drive (VMware, Broadcom, Google Maps)
VMware’s Raghu Raghuram and Broadcom’s Hock Tan with 3401 Hillside Drive and 250 Innovation Drive (VMware, Broadcom, Google Maps)

Broadcom’s $61 billion offer for VMware raises the question of what a deal would mean for the more than 2 million square feet of space the companies currently occupy, including 600,000 square feet in Irvine.

San Jose-based semiconductor maker Broadcom proposed to buy the cloud computing specialist VMWare–which keeps its headquarters about 20 miles away in Palo Alto–in a cash-and-stock deal.

The potential fallout for office space is greatest in the Bay Area, but Broadcom also has a significant presence in the office market in Orange County. The company occupies space at two buildings at 15101 Alton Parkway in Irvine, totaling 661,000 square feet. It put about 51,000 square feet up for sublease over the last two years.

Broadcom’s leases at the buildings — which were sold in 2020 for $355 million to PRP Real Estate Investment Management — goes through 2037, according to media reports.

Broadcom currently occupies more than 1.2 million square feet of space in San Jose, according to public property records and financial filings. The company’s headquarters are located at ​​1320 Ridder Park Drive — a roughly 215,000-square-foot building, though it’s unclear how much of it is leased directly to Broadcom.

Its largest San Jose campus spans about 745,000 square feet at 250 Innovation Drive. The company bought that site for $207 million in 2015 from Boston Properties, public property records show.

Other San Jose locations for Broadcom include 80,000-square-foot leased in a building at 1730 Fox Drive, space at another 80,000-square-foot building at 2880 Junction Avenue, and about 6,400 square feet at 408 Plumeria Drive.

As of the end of 2021, Broadcom owned about 2.5 million square feet of manufacturing, research and development and office space in the U.S., and leased a further 901,000 square feet of space, according to financial filings.

It’s unclear whether Broadcom has enough available space to move Vmware’s more than 5,000 people at its headquarters in Palo Alto. The firm did not immediately respond to a request for comment.

VMware currently leases a roughly 1 million-square-foot property at 3401 Hillview Avenue, located on a campus owned by Stanford University’s Board of Trustees. In San Francisco, the company leases a suite at 501 Second Street.

VMware did not respond to a request for comment on whether the firm would consolidate its operations into existing Broadcom’s buildings.

The proposed merger comes as the Bay Area office market sees slow upticks to absorption and vacancy. Across Silicon Valley, 10.6 percent of office space was vacant in the first quarter, compared to 10.8 percent the previous quarter, according to Colliers.

Putting any significant part of VMware’s or Broadcom current square footage on the market would dramatically affect the area’s sublease market. About 17 million square feet of sublease space was available in the first quarter, according to CBRE.





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