SAN JOSE — A prominent office tower in downtown San Jose has been bought for a much lower price than the last time the highrise was sold, a deal that underscores the frailty of the Bay Area office market in the wake of the coronavirus.
The office building, located at 303 Almaden Boulevard in downtown San Jose, has been bought for slightly under $23.8 million, according to documents filed on Dec. 13 with the Santa Clara County Recorder’s Office.
Entry area of an 11-story office tower at 303 Almaden Boulevard near West San Carlos Street in downtown San Jose. (George Avalos/Bay Area News Group)
George Mersho, chief executive officer of Morgan Hill-based Shoe Palace, headed up the group that bought the 11-story office tower, county real estate files show.
Another company that Mersho heads, Bridge Group Investments, recently began to team up with Los Angeles-based Steerpoint Capital, a real estate firm, on multiple commercial real estate investments. It wasn’t immediately certain if Steerpoint was involved with the 303 Almaden deal.
11-story downtown San Jose office tower at 303 Almaden Boulevard near West San Carlos Street. (George Avalos/Bay Area News Group)
What is clear, however, is that the San Jose office tower sold for far less than its previous purchase price — despite several favorable attributes.
The tower is a Class A office building. With its location at the corner of Almaden Boulevard and West San Carlos, the highrise is deemed to be one of the downtown’s top-notch properties.
Even buoyed by this first-class pedigree, the 303 Almaden tower sold for about 70% less than its price the last time it landed a buyer.
In 2017, Boston-based AEW Capital Management paid slightly under $80.2 million for the office tower, which totals roughly 157,500 square feet.
That worked out to about $509 a square foot, which was then thought to be a record-high price for an office building in downtown San Jose.
At the time, downtown San Jose was flying high. Real estate experts brimmed with confidence that tech companies and developers alike had finally spotted the opportunities and advantages of the urban core of the Bay Area’s largest city.
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Three years later, however, the coronavirus erupted, bringing with it a plague of economic woes that torpedoed office buildings, hotels and retail properties.
The fundamentals that helped office prices and rents rocket to previously undreamt-of heights in downtown San Jose began to crumble in 2020 with the coronavirus outbreak and the government-ordered business shutdowns to combat the spread of the deadly bug.
Even worse, tech companies starting in 2022 began to chop Bay Area jobs in big numbers, a downsizing that also curbed their respective appetites for office space.
Office vacancies rose and rents flattened, unsettling trends that helped to undermine the values of office buildings throughout the Bay Area.
Now, the same 303 Almaden tower that in 2017 created an all-time high benchmark price for a downtown San Jose office building is involved in a property deal that could point to a nadir for the local office market.
The buying group purchased the highrise in an all-cash deal, the county documents show.
