Hines adds land next to South San Jose industrial site

A Texas developer has paid $19.9 million for a lot in South San Jose next to land it recently bought to construct industrial buildings.

Hines, based in Houston, bought a parcel of unknown size at 644 Piercy Rd., the Silicon Valley Business Journal reported. The seller was an affiliate of George Mersho, CEO of Shoe Palace, a Morgan Hill-based chain of 167 retail stores in California.

In December, Hines paid $62.25 million for an adjacent 30-acre lot at 550 Percy Rd., according to the Business Journal.

The developer has filed plans to build two industrial buildings totaling 422,670 square feet on the 550 Percy site–among its latest investments in the South Bay industrial sector.

Industrial space demand is tight in Silicon Valley, according to a recent CBRE report, with vacancy rate of 2.4 percent in the fourth quarter of 2021.
While high demand usually leads to an increase in development, the supply pipeline remains slow.

Between 2019 and 2021, only 2.2 million square feet of industrial space was added to the region and all of it is currently leased, according to CBRE’s data.

In recent years, industrial sites have been turned over for non-industrial redevelopment, according to the Business Journal. In a land-scarce region, areas available for industrial zoning are dwindling, so development has slowed.

South San Jose, particularly the Edenvale area, has increasingly become an area for research and development facilities.

Of the approximate 12.7 million square feet of industrial space, 6.9 percent is available and the average rent per square foot is $1.33 – which is just below the regional average. If approved, the development proposed by Hines would significantly add to the industrial supply.

[Silicon Valley Business Journal] – Dana Bartholomew