North San Jose Offices Trade to Paceline Investors

Paceline Investors is adding to its San Jose commercial property collection.

An affiliate of the San Francisco-based investor acquired the two-story building at 350 East Plumeria Drive for $33 million, the Silicon Valley Business Journal reported. Galaxy Properties sold the structure four years after buying it in 2022 for $37.9 million.

Paceline joined forces with New York Life Insurance to buy the building, which once served as Netgear’s headquarters before the tech company moved to a smaller, 89,400-square-foot office at 3553 North First Street last year. Paceline made the acquisition with $41.1 million in financing from Copia Lending at the time of purchase, per public documents cited by the Business Journal. The building spans 142,700 square feet, with the overall deal working out to roughly $231 per square foot.

The entire building is available for lease, according to CBRE marketing materials on the property. CBRE’s Sherman Chan, Chris Shepherd and Garrett Taylor arranged the transaction and are marketing the building for lease.

Paceline has been active in the San Jose market this spring. In April, the firm partnered with the Roxborough Group to purchase a 92,900-square-foot office building at 2581 Junction Avenue in north San Jose for $12.2 million. Like the Plumeria Drive sale, that transaction was below its previous sale price, though the Junction Avenue building took a steeper 61.9 percent haircut from its 2018 sale price of $32 million. Nautilus Global Commercial Real Estate was the seller in the deal.

Elsewhere in north San Jose, an affiliate of BGO acquired the seven-building Rio Tech Office Park for $164.3 million in April. That property also took a sales price cut as seller Washington Holdings purchased the 375,000-square-foot campus in 2021 for nearly $170 million. In south San Jose last month, tech company Rocket EMS picked up an 80,000-square-foot research and office building at 5729 Fontanoso Way for $18.8 million.

Overall office vacancy in the region dropped from 16.1 percent to 15.4 percent in the first quarter, per CBRE data cited by the Business Journal. North San Jose had a vacancy rate of 16.7 percent across more than 15 million square feet of office space.

— Chris Malone Méndez