Building more vacant office space?

Some dots are so obvious to connect that it's child's play.  Take for example all the office building going on up and down the mid-Peninsula.  One wonders what the developers are thinking.  A big dot was publicized last week in Mountain View per the Merc:

MOUNTAIN VIEW — A lender has seized through foreclosure a South Bay tech campus once touted as an “exquisite” property in fresh sign of the economic troubles facing the Bay Area office market.  The office campus, located at 350 and 380 Ellis Street in Mountain View, was seized by an affiliate of KKR Real Estate Finance Trust, which is managed by New York City-based investment behemoth KKR & Co. Inc.

The $120.6 million that KKR invested to buy the tech campus is a jaw-dropping 66% less than the $357.6 million that an alliance of investment behemoth Goldman Sachs and Bay Area real estate firm TMG Partners paid in 2021 to buy the office complex.  The Ellis Street tech campus is now worth just one-third of its value at the time Goldman Sachs and TMG bought the property almost exactly three years ago.

I did business with clients in those buildings for years.  They are nice spaces (probably "Class A" but I'm no expert).  I just know they have a great location compared to many others in Silicon Valley.  And they lost 2/3 of their value in three years. The dot begging to be connected is this building below on Old Bayshore in dear Old B'game.  It's just one of several in progress as materials and labor costs jump and interest rates stay sticky at about 7%.  It will be a nice space as well with a giant parking garage on the left.  But will it be vacant for a while...or longer?  There are more Bayfront spaces lined up for redevelopment--the Hyatt Cinema is looking ready to fall down by itself.  At least the Broadway-California intersection is getting fixed.....wait, what?

Comments

[Spurinna]

Instead of building a new city hall, the city could use some of that empty space with plenty of parking.

[resident]

Most of City Hall could be run out of leased space anywhere in town. Council meetings could run in the Wreck Center. Nobody’s attending live anyway

[Joe]

It's not just the Bay Area. Add Boston, San Diego and Virginia to the "build it and they will not come" life sciences vacancy rate. From the WSJ today:

This Once Hot Real-Estate Type Is Now Being Offered as Office Space

Developers thought the pandemic era’s supercharged demand for life-science properties was sustainable, but they were wrong

Biotech and pharmaceutical buildings became one of the hottest investments in commercial property at the start of the pandemic. Now, the glut of life-sciences properties has gotten so bad that some developers are exploring the unthinkable: marketing the space for office use.

In the Boston region, for example, owners of at least 10 life-sciences locations are now offering those buildings for office space instead of lab space, according to brokers and other real-estate professionals. The building owners are willing to lease it for office use even though they can face a 30% haircut on what they had hoped to charge for life-sciences use.

Since the first quarter of 2020, more than 59 million square feet of new space has been added with an additional 19.1 million square feet in the pipeline in the U.S., according to real-estate services firm JLL.

By comparison, an average of 3.7 million was added annually in the five years leading up to the pandemic. “A lot of people just threw money in stupidly,” said Joel Marcus, executive chairman and founder of Alexandria Real Estate Equities, one of the largest owners of life-sciences property in the U.S.

Making matters worse, demand for life-sciences space has fallen sharply from its pandemic peaks. Many biotech, pharmaceutical and other life-sciences companies have lost their appetites for rapid expansion because of high interest rates, weak venture-capital financing and an uncertain economy.
-------------------------
Now about those fictitious RHNA numbers local councils are scrambling to comply with?

[Cassandra]

I called this over a year ago.
SSF had the jump on Millbrae and Burlingame.