High-profile project may be future of Great America Santa Clara land

SANTA CLARA — The next chapter for a prime plot of Silicon Valley land beneath the Great America amusement park in Santa Clara is poised to be a game-changer that might be a decade — or just a few years — in the making.

Prologis, one of the nation’s largest real estate firms and a big player in the development of industrial, advanced manufacturing and logistics projects, has paid $310 million for the Great America land, according to the site’s seller, amusement park owner Cedar Fair.

As part of the purchase arrangement, Prologis agreed to lease the land beneath the park back to Cedar Fair so it could continue to operate a theme park at the site for up to 11 years.

Prologis also wove in plenty of flexibility in the leasing part of the deal with Cedar Fair.

The lease runs for six years and provides Cedar Fair with an option to extend the lease for as many as five years. However, Prologis has the right to early termination of the lease if the real estate titan gives Cedar Fair two years’ notice.

Even if the future development plans are yet to be fully revealed, the Santa Clara land is deemed to be a choice Silicon Valley location, according to Bay Area commercial property experts.

“This is a golden site,” said Dave Sandlin, an executive vice president with Colliers, a commercial real estate firm. “The door is wide open for that location.”

The 112.6 acres at 1 Great America Parkway in Santa Clara that Prologis bought could be suitable for a wide array of development options, brokers say.

“I would think it would be a mixed-use development site with plenty of residential,” said Phil Mahoney, an executive vice chairman with Newmark, a commercial real estate firm.

Multiple uses could be successful at the site, which has good access to U.S. Highway 101, State Route 237, a light rail line and an ACE Train station behind Levi’s Stadium.

“Residential would fit well there, office would fit well and retail would fit well there,” Sandlin said.

One major challenge: Office vacancies are sky-high in the city of Santa Clara, brokerage firms report.

At the end of March 2022, the city of Santa Clara experienced an office vacancy rate of 19.3%, which was far higher than the 10.6% office vacancy rate for all of Santa Clara County, a first-quarter report by Colliers determined.

A jaw-dropping 10.2% of the office space in the city of Santa Clara was available for sublease, more than double the 3.7% sublease availability for all of the South Bay, according to the Colliers study.

“There is a lot of office space that’s empty in the Santa Clara market,” Mahoney said. “Until the office market is ironed out in Santa Clara, Prologis probably isn’t going to build office buildings” on the Great America site.

The flexibility in the rental agreement involving the Great America land means Prologis could terminate the lease as soon as two years from now. The start of development also could be 11 years away. Or some time in between.

All of that means is that it’s unclear just how long Great America will be operating at this site, other than it is likely to remain open for at least two more years.

Plus, two major development projects have been proposed in Santa Clara near the Great America site:

— China-based developer Kylli is eyeing a project called Mission Point that features 3 million square feet of office space, 1,800 homes and 100,000 square feet of retail and restaurant space.

— Related Cos. has proposed the development of 5.4 million square feet of offices, 700 hotel rooms, 1,680 residential units and 1 million square feet of retail, food, beverage, and entertainment spaces.

“Who knows what will happen with either of these projects,” Mahoney said. “When and until everything is ironed out with these two projects, Prologis will probably bide its time with the Great America site.”

The recent purchase deal by Prologis also underscores the sharply rising cost of land in Silicon Valley, at least for prime sites.

When Cedar Fair’s affiliate bought the site almost exactly three years ago in June 2019 from the Santa Clara Redevelopment Agency, the amusement park company paid $150.3 million, public property records show.

The $310 million that Prologis paid represents a 106% increase — more than double — in the value of the land beneath the park at the time of the prior purchase.

“You see that for a lot of investment sales now,” Sandlin said. “The price of land is going through the roof in Silicon Valley.”