SAN JOSE — Some high-profile companies are eyeing office space at Santana Row in San Jose — including deals that may trigger their exit from the city’s struggling downtown, several industry sources say.
PwC, a professional services giant officially known as PricewaterhouseCoopers International, is in discussions to lease three floors in One Santana West, a brand-new office building in San Jose across the street from Santana Row, commercial property experts say. The sources did not wish to be named because, while they have close knowledge of the possible transaction, they are not authorized to discuss the leasing talks.
Separately, UBS Group has completed a leasing deal to relocate to an office building within Santana Row, agreeing to occupy 9,000 square feet of office space, according to real estate sources and a commercial property transaction database. That lease was signed in early 2023, the database shows.
The leasing efforts by PwC and UBS would have one result in common: Both companies would depart downtown San Jose.
“It’s not surprising that Federal Realty would try to poach downtown San Jose office tenants,” said Bob Staedler, principal executive with Silicon Valley Synergy, a land-use consultancy.
The potential loss of some companies, however, could ultimately create positive prospects for the city’s urban core, which is besieged by empty storefronts, sky-high office vacancy rates and an uneven return to the workplace.
“This opens up opportunities for Peninsula office tenants to relocate to downtown San Jose,” Staedler said. “Access to downtown office buildings for tenants as well as the lower rents could be enticing for tenants to backfill their space.”
UBS leased its office space at 535 Santana Row, the commercial property database shows. UBS decided to exit an office tower at 50 West San Fernando Street.
PwC is interested in leasing three floors in the One Santana West office building at 3155 Olsen Drive next to Winchester Boulevard, sources said.
The professional services and accounting titan could occupy somewhere in the vicinity of 130,000 square feet to 150,000 square feet in the building.
One Santana West totals 376,000 square feet and has floors ranging in size from 36,000 square feet to 51,000 square feet, according to brokers with Newmark, a commercial real estate firm that is seeking tenants for the top-notch office building.
PwC was said by the commercial property sources to also be considering an office deal in downtown Sunnyvale along with the One Santana West transaction.
Either event would lead to the departure of PwC from its current location in an office tower at 488 South Almaden Boulevard in downtown San Jose.
Databricks, a software company, and Moss Adams, a professional services firm, also are in discussions regarding large office leases at One Santana West, the sources said.
The careers website for Databricks shows the tech company is seeking to hire workers in Mountain View and San Francisco. It wasn’t immediately clear whether Databricks would shift workers from those existing sites or if a deal at One Santana West would represent an expansion location for the software firm.
Moss Adams currently occupies office space in Campbell. It wasn’t clear whether a lease deal at One Santana West would result in a relocation.
Executives with Federal Realty Investment Trust, the principal owner and developer of Santana Row, didn’t respond to multiple requests to discuss the office leasing activity at the destination mixed-use retail, restaurant, residential, entertainment and hotel complex in San Jose.
The commercial property sources agreed the various transactions that could occur at One Santana West have yet to be completed and there were no assurances that final leasing agreements would be accomplished.
However, during an early August conference call with Wall Street analysts to discuss Federal Realty’s second-quarter financial results, a top executive with the real estate firm stated that leasing interest was brisk enough that one or more tenants could soon lease space in One Santana West.
“I’m pretty confident that we will have some leasing success in the relatively near future,” Donald Wood, Federal Realty’s chief executive officer, said during the conference call.
The tenant interest is arriving at a time when Silicon Valley has reached a “stabilization,” as Wood put it during the conference call, for the region’s economy and job market in the wake of the coronavirus pandemic.
For downtown San Jose, the defections are a reminder of the challenges that will face the city’s urban core for some years to come.
“No one is going to build a new office building for some time,” said Mark Ritchie, president of San Jose-based Ritchie Commercial, a real estate firm.
Yet because San Jose has a relatively small downtown with roughly 10.7 million square feet of existing office space, just one big office lease can dramatically swing the prospects for that market.
And because tech companies in Silicon Valley have in numerous instances demonstrated the capability for sudden bursts of hypergrowth, it won’t take much to dramatically intensify demand for office space in downtown San Jose.
“The amount of office space will stay the same but companies will continue to grow,” Ritchie said. “They will grow fastest in Silicon Valley.”