A mid-sized office building in downtown Palo Alto — one of Silicon Valley’s most expensive office markets — will soon be up for sale.
The building at 379 Lytton Ave. has 34,619 square feet of space and is about a half-mile north of a Caltrain station. Office properties of that size in downtown Palo Alto hit the market once a year, at most, or even every other year, Ben Stern, a vice chairman at commercial brokerage firm Newmark’s Palo Alto office, told The Real Deal.
“There’s always buyer demand in downtown Palo Alto regardless of the market,” Stern said. “It’s really hard to find space there.”
CBRE has the listing for the Lytton Avenue building, which is “coming soon for sale,” according to a post on LinkedIn by Michael Frost, a first vice president in CBRE’s Palo Alto office. The post did not disclose an asking price for the building. Jefrey Henderson, an executive vice president at CBRE who’s marketing it for sale with Frost and senior associate Jon Teel, declined comment for this story.
The three-story structure is owned by Lytton-Campbell Associates LLC, which purchased it for an undisclosed sum in 1998, according to Santa Clara County property records. Doris Davis, who’s listed on the California Secretary of State Office’s website as the company’s manager, did not respond to requests for comment.
The building will hit the market in early September and will be delivered vacant, according to a real estate industry source with knowledge of the listing who was not allowed to talk publicly about it. Its existing, sole tenant is law firm Sheppard Mullin, which occupies all of its space on a lease that’s slated to expire sometime this year, according to the property records website CompStak.
Sheppard Mullin’s Silicon Valley office, which has called 379 Lytton Ave. its home since 2011, is moving to a new space at 1540 El Camino Real in Menlo Park this fall once its lease on its existing space ends, John Buchanan, a senior communications manager at Sheppard Mullin, told The Real Deal on Friday. Buchanan declined to say how much space the firm leased at 1540 El Camino Real, how long its lease term there is or how much it’s paying at the start of it.
The company’s new Menlo Park office is located within an under-construction, mixed-use development containing 27 apartments in one building and nearly 41,000 square feet of office space in a separate, adjacent structure. The latter building has 14,458 square feet of Class A space available for lease and is slated for completion sometime this quarter, according to an online brochure marketing it for rent.
That space costs $9.25 a square foot a month to rent, excluding utilities, property expenses and building services — more than a dollar higher than the average asking rent for office space in downtown Palo Alto at the end of last quarter, according to Newmark data.
Vice chairmen David Hiebert and Kevin Cunningham, of Cushman & Wakefield and Newmark, respectively, are marketing the office portion of the 1540 El Camino Real development for lease. Hiebert did not immediately respond to a request for comment.
Prior to the Covid-19 pandemic, office buildings in downtown Palo Alto were changing hands for more than $2,000 a square foot, a clear indicator of the area’s desirability. In 2018, for example, a 9,068-square-foot building changed hands for $2,602 a square foot, and a three-story multi-tenant office structure two blocks from 379 Lytton Ave. sold for about $2,156 a square foot.
Since the start of the pandemic, however, the area’s office vacancy rate has increased to 17.21 percent from 9.15 percent, while its average asking rent has dropped to $8.23 a square foot a month from $8.77, according to Newmark data.
Even still, downtown Palo Alto’s office submarket is still the third-most-expensive one in Silicon Valley, behind Sand Hill Road in Menlo Park and downtown Mountain View, according to Newmark data. Therefore, the building at 379 Lytton Ave. will be a good test case for the extent office investors think the submarket will be able to bounce back from Covid-induced challenges.