$1.1B portfolio purchase includes five Bay Area suburban office properties

A $1.1 billion portfolio purchase by a Florida investor snared five suburban office properties of nearly 500,000 square feet in San Carlos, San Jose and Walnut Creek.

Workspace Property Trust, a privately held real estate firm in Boca Raton, teamed up with sovereign wealth fund GIC Pte. of Singapore in a portfolio bet that suburbs will rebound stronger than downtowns, the San Francisco Business Times reported.

The investment duo bought 53 buildings with nearly 8 million square feet. The seller, Griffin Realty Trust, will retain a minority stake in the properties. The deal was financed by JPMorgan Chase & Co. and Bank of Montreal.

The Bay Area properties include a pair of nearly 104,000-square-foot buildings at 1 Circle Star Way and 2 Circle Star Way in San Carlos; a nearly 84,000-square-foot building at 880 Ridder Park Drive and a nearly 98,000-square-foot building at 3001 Orchard Parkway in San Jose; and an 85,500-square-foot building at 401 Lennon Lane in Walnut Creek.

The acquisition will double Workspace’s portfolio to 18 million square feet and includes buildings in Atlanta and Dallas, plus the Bay Area offices, according to the Wall Street Journal.

Workspace CEO Thomas Rizkco told the Journal the company believes the pandemic hastened a shift to suburban offices.

The billion-dollar bet is that demand will rise for higher-end, modern suburban offices in good locations as more companies seek out areas closer to where their employees live. The idea is that more employees work from home part of the week and some firms want to add spaces so workers can return to the office without having to commute far.

Suburban office properties across the nation have suffered less than some central business districts, where vacancies are at record levels, according to the Journal.

In the second quarter, the U.S. downtown office vacancy rate surpassed the suburban vacancy rate for the first time in decades, according to CBRE Group. Vacancies fell slightly to 16.8 percent in the suburbs and rose to 17 percent in city centers, the brokerage firm said.

In San Francisco, office vacancy rates stood at 22.4 percent in July, with vacancies ranging from 11.9 percent for Class A to 37.2 percent on Class C properties.

In more suburban Silicon Valley, average vacancy rates for office space improved to 10.6 percent during the first quarter, from 10.8 percent in the previous quarter. The worst office submarket was the city of Santa Clara, with an office vacancy of 19.3 percent.

— Dana Bartholomew

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