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The New Silicon Valley Land Banking: Corporate Campuses Sell Out to Homebuilders

Thanks to the recession and various iterations of the dot-com boom and bust, Silicon Valley has a large, stagnant pool of empty office and light industrial space. The same region is woefully underbuilt with housing. Unsurprisingly, homebuilders are making inroads into the underused office parks and industrial sites in Santa Clara County.

One result of this trend could be described as a new form of land banking. Produce growers and dairy farmers have traditionally relied on home builders to help them cash out on the value of their land holdings. When the developers come knocking, the farmers take the money and set up business anew in the next valley. Now it appears that high-tech businesses that established offices on prime real estate years ago are learning comparable skills in the art of land-banking, by selling off surplus acreage--or even their entire campuses--for a "higher and better" use.

In the city of Santa Clara, Danville-based Trumark Homes says it plans to tear down 141,000 square feet of office/R&D space on an eight-acre parcel in the city of Santa Clara, replacing it with residential units. The site was formerly owned by Extreme Networks, an Ethernet network company, which continues to operate on a neighboring eight-acre campus. Trumark plans to build 112 townhouses and 42 single-family homes on the former high-tech/light-industrial site, which is located near Caltrain's Lawrence Expressway station and an existing residential neighborhood.

Extreme Networks, meanwhile, will reportedly continue to operate in a contiguous eight-acre parcel, although the company has allowed the homebuilder to rezone the entire Ethernet property for residential development, according to Trumark v.p.Arden Hearing. Earlier this year, Santa Clara City Council unanimously approved the change to the city's general plan, allowing the housing to go forward on land formerly zoned for office and light-industrial uses.

Resmark Equity Partners, a Los Angeles-based residential investment advisor, is a financial partner in the project.

Trumark is notable among local developers for targeting infill home building opportunities in Silicon Valley, where the value of commercially zoned land has slumped. Several of the projects are located near existing commuter-rail corridors, allowing the developer to tout the projects as "transit oriented." 

An analogous project is a homebuilder's plan to build 89 single-family (i.e. detached) homes in South San Jose's Almaden Valley district on what had been a 16-acre industrial park. The homebuilder says it plans to demolish a 123,000-square-foot office building and a 55,000-square-foot industrial structure currently on the site. 

Trumark has similar plans to build on industrial or commercial land in San Jose, where it plans to build 96 townhomes in the city's Berryessa district. Known as North Capitol Villas, the San Jose project is within walking distance of the Santa Clara Valley Transportation Authority (VTA) light rail, as well as an existing elementary school. The same homebuilder is reportedly buying 300 acres in Sunnyland. 

--Morris Newman