Kennedy Wilson Sells Bay Area Office Campus
The property traded for less than half of its pre-pandemic price.
SC Properties has acquired San Mateo Gateway Center, a 235,000-square-foot office campus in San Mateo, Calif. The property traded for $37.5 million, the San Francisco Business Times reported.
The previous owner was Kennedy Wilson, which bought the asset in 2019 from Hines Interests for $87.5 million, according to CommercialEdge.
At the time of the transaction, the property was approximately 40 percent vacant. SC Properties Partner Kevin Phillips, who oversaw the purchase along with Managing Director Chris Giotinis, said in prepared remarks that the company sees momentum in return-to-office, which will help lease the remaining space.
Cushman & Wakefield Managing Director Gary Boitano, alongside JLL Senior Managing Director Clarke Funkhouser, consulted the buyer on the deal. The two have been tapped to lease the campus.
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Available spaces at the property range from 1,700 square feet to a full floor totaling some 26,000 square feet, with the potential for further expansion within the same building. San Mateo Gateway’s tenant roster includes The Manor Association, Cetree, Camico, Warner Design and Cala Health, among others, CommercialEdge data shows.
The campus encompasses three Class A buildings which came online between 1985 and 1987, and underwent cosmetic renovations in 2016. The upgrades feature an on-site cafe, new spec suites, outdoor lounge and seating areas, a conference room and a fitness center. The buildings offer a total of six passenger elevators, controlled access and floorplates ranging between 24,000 and 30,770 square feet.
Located at 1800, 1810 and 1820 Gateway Drive, the property has access to U.S. Highway 101 and Interstate 280. Downtown San Francisco is some 21 miles away.
Another Bay Area office transaction closed at a steep discount recently. Behring Cos. acquired 1950 Franklin St., a 446,998-square-foot office building in Oakland, Calif. Kaiser Permanente sold the 21-story asset for only $14.4 million.
Bay Area office market still stymied
The Bay Area office market continues to post an elevated vacancy rate, coming in at 25.6 percent in the second quarter of 2024, according to CBRE, with a negative net absorption of 1.4 million square feet.
During the years immediately before 2020, the market-wide vacancy rate was around 6.0 percent, which represented a recovery from the higher rate in the aftermath of the Great Financial Crisis.
According to CBRE, there have been no periods of positive absorption in the Bay Area office market since 2020, although the pace of negative absorption has slowed down recently. In 2023, more than 15 million square feet were returned to the market.
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