San Jose office project near Santana Row seeks big tech tenant

SAN JOSE — The owner of a big office building near San Jose’s iconic Santana Row remains optimistic about the property’s prospects despite still seeking the structure’s first tenants.

One Santana West, perched on a prominent spot across the street from Santana Row, has yet to entice its first tenant, but there’s room for optimism, real estate executives recently told Wall Street analysts during a conference call.

Federal Realty Investment Trust, the principal developer and owner of both the Santana Row mixed-use village and the One Santana West office building, isn’t discouraged by the office project’s currently empty status, the company said while on a conference call to review the firm’s third-quarter financial results.

One Santana West totals 357,000 square feet and is one of Silicon Valley’s most modern office buildings now that it’s complete. The building is proximate to a pair of high-profile centers that are magnets for commerce and regional destinations: Santana Row and Westfield Valley Fair mall.

Federal Realty executives believe the building’s location near Santana Row and Valley Fair enables its marketing team from Newmark, a commercial real estate firm, to tout its access to amenities such as restaurants, shops, entertainment hubs, homes and hotel facilities.

The new office building has yet to land a tenant with a signed lease, Don Wood, Federal Realty’s chief executive officer, said during the Nov. 3 conference call. Wood expressed a high level of optimism, though.

“In terms of Santana West, we’re not there on anybody yet, but we remain as positive as we ever have with respect to the product,” Wood said.

One of the analysts on the conference call, Derek Johnson of Deutsche Bank, a finance and investment firm, asked a question about how tenant and broker tours of the building have fared.

Johnson also offered an observation during the call about the types of office buildings — such as One Santana West — that are more likely to succeed in a time of uncertain leasing activity.

“What we learned exiting the pandemic era is (a good) office location, newness, quality operators, they have all seen and, and should continue to see outsize demand,” Johnson said before asking his question.

The location of One Santana West near the two huge malls is a “differentiator” compared with other office buildings in Silicon Valley, Wood said.

“We remain as confident as we’ve ever been,” Wood said.

Wood added that he believes chief executive officers and other decision-makers for a large office lease to accommodate their company are inclined to seek sites with plenty of nearby amenities.

The big question mark that looms over the Bay Area office market, home to numerous tech titans, is how quickly will these companies prod employees to return to the office on a regular basis at a time when the hazards posed by the coronavirus have receded.

It appears that the tech sector is pushing hard for a major ramp-up for in-office work, said Jeff Berkes, chief operating officer at Federal Realty.

“Big change out here in Silicon Valley,” Berkes said. “We talked a little bit about this last quarter. But three, six months ago, the big question here was when are we going to get people back to the office?”

Berkes noted that during the Federal Realty conference call in early August to discuss the second-quarter results, he stated that Google, Apple and other tech companies had decided to get the workers back in the office soon after Labor Day.

“That has in fact happened,” Berkes said.

Berkes noted that freeways such as U.S. Highway 101 in Santa Clara County and San Mateo County and Interstate 280 in the South Bay, along with the Bay Bridge, have increasingly become crammed with cars.

Traffic jams were a familiar sight in the Bay Area — at least until March 2020, when deserted roads became the norm due to the outbreak of the coronavirus and government-ordered business shutdowns to curb the spread of the deadly bug.