Terreno Buys Three Silicon Valley Buildings for $33.7M

By Scott Baltic, Contributing Editor

Terreno Realty Corp., of San Francisco, has acquired three multi-tenant industrial buildings in Sunnyvale, Calif., totaling about 172,000 square feet for a purchase price of approximately $33.7 million.

The transaction comprised two R&D buildings totaling about 101,000 square feet, on East Caribbean Drive and on Moffett Park Drive, and one distribution building of about 71,000 square feet, also on East Caribbean Drive.

The properties are adjacent to Highways 237 and 101 and are 100 percent leased to two tenants. The transaction’s estimated stabilized cap rate is 7.1 percent.

Terreno Realty owns and operates industrial real estate in six major coastal U.S. markets: Los Angeles, Northern New Jersey/New York City, the San Francisco Bay Area, Seattle, Miami  and Washington/Baltimore. Terreno’s website describes the portfolio as “functional, flexible, infill real estate located where the nation’s largest consumer populations meet the highest-volume distribution points.”

By far the largest portion of Terreno’s portfolio is in metro New York/New Jersey, nearly 1.6 million of the total of nearly 3.5 million square feet. The Sunnyvale acquisition brings Terreno’s Bay Area holdings to 12 buildings totaling 600,000 square feet.

After several quarters of inconsistent activity, the Silicon Valley industrial and warehouse markets “are finally seeing elevated activity and optimism from both tenants and landlords,” according to independent West Coast CRE company Kidder Matthews. Average asking rents in both sectors saw small increases in the first quarter, and the market’s highest average asking rents, at $1.56 per square foot triple net, were in Sunnyvale.

R&D space in Silicon Valley saw net absorption of more than 460,000 square feet in the first quarter, with average vacancy falling to 13.7 percent, down four percentage points from 12 months earlier, according to Kidder Matthews research. The Sunnyvale submarket had substantially lower-than-average vacancy, at 9.5 percent.

Finally, sales activity was strong among both institutional investors and owner-users. Roughly 285,000 square feet of R&D space was picked up in the first quarter in Sunnyvale alone.