SAN JOSE — A big office building in San Jose has been bought for a price that points to an unrelenting nosedive in values for commercial properties in the Bay Area.
The building, located at 2125 O’Nel Drive next to the PayPal headquarters, was bought for $15 million by an affiliate controlled by BH Properties, according to documents filed on May 9 with the Santa Clara County Recorder’s Office.
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The north San Jose acquisition offers fresh evidence of a plunge in value for office buildings throughout the Bay Area on the heels of slumping office rents and soaring vacancy levels.
Some of the Bay Area office market woes have morphed into a rising tide of defaults as lenders move to foreclose on delinquent loans.
The just-bought north San Jose building totals 110,700 square feet. The building’s seller, an affiliate of Embarcadero Capital Partners, extensively renovated the property ahead of the sale.
In 2018, the Embarcadero Capital affiliate paid about $24.1 million for the two-story building. Embarcadero was also seeking to sell the building for $23 million, according to a sales brochure that Colliers, a commercial real estate firm, was circulating in December 2024.
This means the building’s value has tumbled 35% since its prior sale.
Even worse, the property’s assessed value was $34.1 million as of January 2024. The means the purchase price is 56% below its assessed value.
The declining property values could cause property tax revenue to an array of public agencies to dwindle.
Jolts caused by slumping property values extend well beyond a survey of the local real estate economy. Property value trends can imperil revenue for an array of public agencies.
If real estate values turn soft in a jurisdiction, that could squeeze a crucial revenue stream for cities, counties, regional agencies and school districts.
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