SAN JOSE — A new office building at Santana Row in San Jose has become enough of a tenant magnet that it may soon be half-leased, a sign some commercial real estate projects can thrive despite a tough office market.
One Santana West, a large office building located across the street from the Santana Row mixed-use neighborhood, is enjoying brisk leasing activity, real estate executives told Wall Street analysts during a conference call this week.
The upbeat leasing situation for the office building at 3155 Olsen Drive in San Jose was sketched out by top officials with Federal Realty Investment Trust, the principal owner and developer of Santana Row.
One large office lease was complete at One Santana West, while another big lease was in the final stages of being fully completed, Donald Wood, chief executive officer of Federal Realty, told analysts during the conference call to discuss the company’s financial results for the October-through-December fourth quarter of 2023.
“With those deals complete,” Wood said in his opening remarks for the conference call, “Santana West will be nearly half leased up.”
Acrisure, a fast-expanding financial technology and insurance company, leased 29,000 square feet in One Santana West, Federal Realty executives disclosed in December 2023.
Now, another major lease is in the works at One Santana West, Federal Realty officials said during the conference call. The possible tenant has signed what is known in the commercial property business as a letter of intent, or LOI.
“There is a large tenant (at One Santana West) that we are very close to lease signing on, the LOI is done,” Wood said. “We’re in the last stages of lease signing.”
It wasn’t immediately clear how much square footage the unknown tenant might occupy at the office building.
“That deal, along with Acrisure and a couple of other smaller things are what gets us to that half done on that building, One Santana West,” Wood stated during the conference call.
One Santana West, which was completed in 2022, totals 375,000 square feet and is near the corner of South Winchester Boulevard and Stevens Creek Boulevard.
Newmark commercial real estate brokers Todd Shaffer, Tracey Solari, Randy Gabrielson, Shawn Kellenberger and Mark Garner arranged the Acrisure lease. Newark has been scouting for tenants to occupy the big office building.
Federal Realty executives believe the mixed-use Santana Row neighborhood across the street is helping to entice tenants to take a close look at leasing space in One Santana West.
“They’re looking for the amenities, they’re looking for a better building, they are looking to upgrade their location,” said Jan Sweetnam, chief investment officer with Federal Realty.
Tenants tend to seek less office space at what Federal Realty executives describe as “state-of-the-art” office buildings such as One Santana West than the sites they are vacating — which means they might be willing to pay higher rents per square foot at their new sites.
“While they may be paying a higher rent per foot in our buildings than they were paying because they’re taking less square footage, their overall occupancy costs are less,” Dan Guglielmone, Federal Realty’s chief financial officer, told analysts during the conference call.
The financial terms of Acrisure’s rental agreement at One Santana West weren’t disclosed at the time the lease was signed.
Acrisure officials, however, made it clear that Santana Row’s amenities played a role in the decision by the fast-expanding financial technology and insurance company to relocate to One Santana West.
“The walkability to Santana Row and the amenities are huge,” Jennifer Anderson, managing partner with Michigan-based Acrisure, told this news organization in December when the lease was revealed.