Palo Alto might have a tough-on-development reputation, but that hasn’t stopped some new projects from rolling forward.
Last week, Canyon Capital Realty Advisors said it had provided debt financing for College Terrace, a 66,000-square-foot mixed-use building at 2100 El Camino Real that was approved back in 2009, in a deal that will get the project under construction this year.
Meanwhile, Thoits Bros. Inc. late last year received all approvals for a 26,800-square-foot office building at 500 University Ave. in downtown.
That followed a green light in November of a 74,122-square-foot mixed-use building at 3159 El Camino Real from Tarleton Properties.
“It’s not rocket science why people want to invest there,” said Marti Page, a director at Canyon Capital, which provided a $49.5 million construction loan for College Terrace.
The Peninsula city has been Ground Zero for rising rents during the current market recovery. Average asking rents for office space were $5.49 a foot in the fourth quarter, according to Colliers International. That’s the highest in Silicon Valley, according to the brokerage.
The hot market has led to a development rush, but that has led in turn to some resident pushback. A successful initiative that many observers saw as a proxy for anti-development sentiment derailed a 60-unit senior housing project in November. The next month, Jay Paul Co. pulled a redevelopment proposal for 395 Page Mill Road after stiff opposition. A major project from John Arrillaga at 27 University Ave. is also on hiatus.
At a recent Cornish & Carey Commercial Newmark Knight Frank forecast event, partner Phil Mahoney called the ability to get approvals “a big story in 2014.”
One upshot: Projects with all their entitlements suddenly look a lot more attractive.
“What was compelling is, you’re dealing with a full city block, which is unique in Palo Alto, and it’s got this unique zoning, which over time has become increasingly coveted,” Page said of the project.
Canyon also liked that the project was not on a ground lease, unlike many of the properties in the area, which are on Stanford University-owned land.
“Really, it’s the location — you’re bound on one side by the university, and on the other by the Research Park,” she said.
The 1.4-acre project will include 45,000 square feet of office, 9,000 square feet slated for a grocery, 7,000 square feet of additional retail space and eight below-market-rate housing units. Construction is slated to begin in spring 2014 with completion set for August 2015. Blach Construction is the general contractor. Carrasco & Associates is the architect.
The project’s efficiency cred includes a green roof, solar panels, rainwater collection and efficient building systems. Blach says it’s designed to meet LEED Silver criteria and is striving for the more stringent LEED Platinum.
Other developers are not being dissuaded by the shifting development winds. This week, the Minkoff Group closed on 385 Sherman Ave., a .64-acre site, according to county records. The seller, Sand Hill Property Co., dropped its own development plans there in 2009. Minkoff has submitted a preliminary proposal for a 55,566-square-foot mixed-use building there. The developer declined to comment this week.
Sand Hill Property isn’t sitting still, either. The company bought the former Facebook Inc. headquarters at 1050 Page Mill late last year, and has turned in plans to replace the old R&D buildings on the site with 284,000 square feet of new Class A office space. That is the same footprint as the existing buildings, according to city documents.