Bluerock Buys Sunnyvale Office Hub

A Bluerock affiliate has acquired a major Sunnyvale office property for $330.7 million. The New York-based alternative asset firm purchased the complex at 1133 Innovation Way from Hewlett Packard Enterprise.

The deal includes a long-term leaseback agreement with the building's sole tenant, Juniper Networks, which runs through 2047. Hewlett Packard Enterprise acquired Juniper Networks last year for $14 billion.

An HPE spokesperson told the Silicon Valley Business Journal that selling the building was part of the company's strategy for managing its portfolio of real property assets. HPE continues to own and occupy an adjacent building at 1137 Innovation Way.

The Sunnyvale Property Details

The acquired hub is an eight-story, Class-A office building. It is located near Moffett Field. According to The Mercury News, Bluerock funded the purchase with a $310 million loan from a group led by Wilmington Trust.

Hewlett Packard Enterprise has been reshaping its Silicon Valley footprint for several years. The company relocated its main Silicon Valley offices from Palo Alto to north San Jose in 2018. In 2020, HPE announced it was moving its global headquarters to Spring, Texas, and opened a corporate campus there.

Bay Area Office Market Context

The transaction is the latest in a series of Bay Area office acquisitions in recent months to exceed $1,000 per square foot. Analysts say this points to growing investor confidence in office properties anchored by investment-grade, premier tenants.

In mid-July, Shorenstein purchased 550 Allerton Street, a property in downtown Redwood City, for $78 million. That building was 81% leased and anchored by law firm Gunderson Dettmer.

However, high vacancy rates continue to pressure many office landlords across the Peninsula and South Bay. Kidder Mathews reported that office vacancy in all Peninsula submarkets was 23.8% in the second quarter.

Vacancy Rates and Pipeline

Kidder Mathews researchers provided specific vacancy figures for key areas. They noted that with a limited new development pipeline, vacancy is expected to tighten as companies in sectors like artificial intelligence and fintech seek space.

The development pipeline for the Peninsula is limited. In contrast, office vacancy in Silicon Valley was much lower in the second quarter, at 16%. That figure is down 170 basis points year-over-year. Kidder Mathews' research group said Silicon Valley has new product in its development pipeline.