CBRE Arranges $55.25 Million Sale of Edenvale Industrial Park In San Jose, Calif.

CBRE Capital Markets has arranged the sale of Edenvale Industrial Park, two advanced manufacturing buildings totaling 256,250 square feet and a 10.16-acre developable industrial land parcel located in the South San Jose submarket of Silicon Valley.

Scott Prosser, Joe Moriarty and Jack DePuy of CBRE’s Northern California Capital Markets team represented DivcoWest Silicon Valley Investments in their sale of the property to J&J Properties and J & L Properties, which were represented by Frederic Esrailian of FTE Realty. This is the second transaction between the parties in the last calendar year, with the first one being 845 Embedded Way, located immediately below Edenvale Industrial Park.

“This was a great opportunity for J&J Properties and J & L Properties to acquire another project in Silicon Valley that offers great cash flow and upside with the additional 10 acres of developable land,” said Scott Prosser, Executive Vice President at CBRE.

The two high-quality, advanced-manufacturing buildings meet the needs of today’s tenants with significant power distribution, parking ratio and clear height. The property has an on-site electrical substation with 21KV primary switch gear. Manufacturing properties with high electrical power have a significant advantage in the market as many manufacturing users require high power for their operations. Given the significant cost and long lead time to upgrade power at existing buildings, Edenvale Industrial Park possesses a significant advantage over properties with lesser power.

The buildings have been fully occupied since construction completion 19 years ago, demonstrating the buildings’ – and the submarket’s – ability to attract and retain tenants. Celestica, which occupies 5325 Hellyer Avenue (50 percent of the property), will vacate at the end of their lease term this month, and Olympus will move in in June 2020 with a new, 15-year lease. The property at 875 Embedded Way is fully leased and occupied by Teradyne through December 2022. Teradyne and Olympus’ mid-to-long term leases provide the new owner with stabilized income.

The 10.16-acre developable industrial land parcel presents the rare opportunity to build a state-of-the-art industrial facility in a market where little vacant, developable land remains. The property’s Industrial Park (IP) zoning allows for a wide range of uses, including research and development, manufacturing and assembly, testing and office, offering flexibility for a variety of tenants.

The overall South San Jose market has undergone a fundamental shift the past couple of years due to a wave of tenant migration into the submarket. Since 2017, over 2.25 million square feet of tenants and owner/occupiers have moved to South San Jose. Many of these companies are relocating from Northern Silicon Valley due to the lack of options within those submarkets and the high-quality space that South San Jose provides at more economical rental rates.

Silicon Valley’s industrial/manufacturing market is one of the most supply-constrained markets in the nation. The overall manufacturing vacancy rate at the end of the third quarter of 2019 was 2.0 percent and has been below 3.0 percent for the past 18 quarters. The Olympus lease demonstrates the lack of supply as the building was leased prior to marketing the space and long before the current tenant vacates. A lack of supply, coupled with a consistent, elevated demand, has increased asking rates over 59 percent since the beginning of 2014.