$27B chipmaker signs 92K sf office lease in North San Jose

Latest in flurry of office, R&D leases in area

Onsemi's Hassane El-Khoury with 150 Rose Orchard Way, Microships
Onsemi's Hassane El-Khoury with 150 Rose Orchard Way (LinkedIn, Loopnet, iStock)

A chipmaker has signed a 15-year lease for a 92,500-square-foot office building in North San Jose, the latest in a flurry of mid-to-large-sized leases for commercial properties in the area.

Phoenix-based Onsemi took the entire Class A office building at 150 Rose Orchard Way, part of a five-building campus owned by Drawbridge Realty. The property was previously occupied by chip designer Arm, a Softbank-owned company, which negotiated an early lease termination because it no longer needed the space, Drawbridge’s Charlie McEachron told The Real Deal. Arm’s lease termination was completed concurrently with Onsemi’s lease, McEachron said.

It’s unclear whether the deal is an expansion or a consolidation of Onsemi’s Silicon Valley footprint, as the company didn’t respond to requests for comment. However, online property listings whose addresses match that of known Onsemi office locations indicate it may be a consolidation. Cushman & Wakefield is marketing two of those known offices at 2975 and 3001 Stender Way in Santa Clara as available for lease in the future. They total about 110,100 square feet combined, larger than the single building Onsemi leased on Rose Orchard Way.

Elsewhere in Silicon Valley, Onsemi rents an almost 96,000-square-foot research building at 1272 Borregas Avenue in Sunnyvale for its Fairchild Semiconductor unit. Its lease there expires in 2025, CompStak data show. It also has a center for its design and engineering departments in an unidentified location in San Jose, according to its website.

The deal extends a streak of mid-to-large-sized leases for office and research properties in North San Jose, where several were signed last quarter. The largest was China-based electric carmaker NIO’s 201,500-square-foot, full-building lease on 3151 Zanker Road, about two miles south of Onsemi’s new space, according to Cushman & Wakefield data. Elsewhere in the area, Procept BioRobotics and iPhone maker Foxconn collectively leased almost 277,000 square feet of research space during that time.

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Three of Silicon Valley’s five largest leases for research properties were in North San Jose last quarter, Cushman & Wakefield data show. Those deals underline the submarket’s attractiveness to companies in various industries such as manufacturing, robotics, and, in Onsemi’s case, semiconductors. While its office real estate market isn’t performing quite as well as its R&D one, reasons for optimism remain: ByteDance is in talks to sublease Yahoo’s entire 658,000-square-foot campus in North San Jose. If completed, the deal would be one of the largest takedowns of a Silicon Valley office property in years.

The Onsemi lease also comes as another chipmaker, Broadcom, is in the process of buying cloud computing specialist VMWare. The two sides struck an agreement last month for San Jose-based Broadcom to buy Palo Alto’s VMWare in a $61 billion cash-and-stock deal, potentially setting the stage for the latter to consolidate its operations into its new owner’s buildings. Broadcom occupies more than 1.2 million square feet of space in San Jose, while VMWare leases a roughly 1-million-square-foot office and research campus in Palo Alto’s Stanford Research Park.

Onsemi’s business has performed well of late. The company, which has a market cap of $27.2 billion, reported $530 million in net income last quarter, up 24 percent from the previous three-month period. Driving that increase was almost $2 billion in revenue, a new record for Onsemi for a single quarter. Its stock price of $60 a share, meantime, is up about 60 percent from this time last year, according to Yahoo Finance data. It had 1,100 local employees and 34,500 overall at the end of last year, according to Silicon Valley Business Journal data.

Cambridge, England-based Arm recently laid off about 24 percent of its workforce, or 80 people, at its U.S. headquarters in North San Jose, which previously consisted of two adjacent buildings at 120 and 150 Rose Orchard Way. The company continues to rent the 63,000-square-foot building at 120 Rose Orchard Way as its U.S. base. It ended its lease on 150 Rose Orchard Way on May 26, spokesperson Phil Hughes told The Real Deal. The property housed employees from a business it transitioned over to SoftBank late last year, said Hughes, who declined further comment. It’s unclear how much, if anything, Arm paid in early termination fees to end its lease there, which wasn’t set to expire until Nov. 30, 2028, according to an online brochure marketing it for sublease.

Cushman & Wakefield’s Brad Altick represented Onsemi in lease negotiations for 150 Rose Orchard Way, Drawbridge’s McEachron said. Drawbridge represented itself in the deal, he said.

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