North San Jose Building Trades at Discounted $12 Million

Paceline Investors has paid $12.2 million for a North San Jose office building, a nearly 62 percent haircut from its price in 2018.

The office and research building at 2581 Junction Avenue has 92,900 square feet, Mercury News reported. Sales documents were filed with the Santa Clara County Recorder’s Office on Wednesday.

The original asking price for the property was $33 million, nearly three times its final sales price. An affiliate of Nautilus Global Commercial Real Estate previously bought the building in 2018 for $32 million, which calculates to 61.9 percent less than its recent value.

Ensurge Micropower, a battery maker, is the sole tenant in the building. According to sources cited by Mercury News, Ensurge has tried to sublease the building.

Paceline, based in San Francisco and managed by CEO Sam Loughlin, owns a number of office properties in the Bay Area, including a 700,000-square-foot campus in Alameda. It bought up properties in the 2020 and 2021 period, including an $18.8 million research and development property at 1155 Bryant Street in the SoMa district of San Francisco through a joint venture with Rialto Capital.

Along with the rest of the Bay Area, the North San Jose office market has suffered since the pandemic, although data centers could provide better times ahead. Late last year Nvidia leased a building at 300 Holger Way with plans to create a 100,000-square-foot data center. Data center-related companies such as Antora Energy have taken space in the market in step with the AI boom. Google recently added to its North San Jose presence.

In the wider Bay Area office market, AI has emerged as the next big thing. San Francisco is projected to report about 3 million square feet of net absorption in the first quarter, with AI accounting for 40 percent of that total, according to a report from brokerage JLL. AI’s footprint in the city could reach 14 million square feet by the end of the decade.

– Joel Russell