SUNNYVALE — A big office complex in Sunnyvale that could be replaced by housing has been seized by its lender, a foreclosure that suggests the Bay Area’s office market remains feeble.
Horizon Sunnyvale, known in commercial real estate circles as a “horizontal highrise” due to its massive end-to-end length, has suffered foreclosure and has been returned to its lender.
Loancore Capital REIT took back the office complex through a foreclosure that valued the property at $57.3 million, documents filed on May 15 with the Santa Clara County Recorder’s Office.
To be sure, the foreclosure underscores the nagging weakness in the Bay Area commercial real estate market.
Yet the foreclosure might help reduce the maladies that afflict the ailing office sector — by taking a big building out of the inventory of vacant office space.
The empty office complex comprises four connected buildings that stretch along an entire Sunnyvale city block. The office hub totals 181,200 square feet.
The housing development would consist of 315 residential units, Sunnyvale planning documents show.
Sares Regis Group of Northern California, a major residential developer, is working with the lender on the proposed development, according to the city records.
The struggling office market could benefit from a housing conversion because the currently empty square footage would be removed from the office building inventory in Santa Clara County and no longer contribute to local vacancies.
The development would bulldoze the office building and clear the 7.9-acre site to accommodate the housing. The property has addresses of 1230, 1250, 1270 and 1290 Oakmead Parkway in Sunnyvale and is in one of Silicon Valley’s prime tech hubs.
The financial difficulties that beset the property are a fresh example of the economic cataclysm that has engulfed the Bay Area office market in the wake of the coronavirus outbreak in early 2020.
The attempt to replace the offices with housing is an example of the new ways that real estate firms are attempting to cure the coronavirus side effects.
Of the 315 units, 252 would be market-rate townhouses and 63 would be affordable apartments set aside for low-income residents.
An estimated 15 of the buildings would be townhouse units. One building would be a multifamily apartment complex, the documents show.
Embarcadero Capital, one of the Bay Area’s top-notch and veteran real estate firms, bought the big three-story office complex in 2016. In 2020, Embarcadero Capital launched a complete modernization of the buildings.
The revamp of the Sunnyvale office center occurred at a time when tech companies were engaged in big expansions of their footprints.
Soon after the renovation was completed, however, coronavirus-linked fears prompted a flurry of companies to rethink how their office spaces should be structured.
Plus, severe economic challenges have emerged for the Bay Area office market in the wake of the tech industry chopping jobs in the region and companies cutting back the size of their work footprints.