Accenture to Move to Downtown S.J.
By Katherine Conrad, San Jose Mercury News, Calif.
Apr. 27–In another coup for downtown San Jose, the consulting firm Accenture is moving its Palo Alto office south to the tower commonly known as the Knight Ridder building.
Commercial real estate broker Mark Ritchie said Accenture, currently on Page Mill Road, signed a 10-year lease last week for 32,000 square feet on the 12th floor and most of the 11th floor at 50 W. San Fernando St. The floors were formerly occupied by the now-defunct Knight Ridder and the San Jose Redevelopment Agency.
“This is a high-profile, five-star company coming from Palo Alto,” said Ritchie, who would not disclose the value of the lease, but said Accenture is paying close to the asking rent of $2.65 a square foot per month for the Class A space. If it agreed to pay about $2.50 a square foot, that would put the transaction’s value near $10 million.
Calls to Accenture, which was spun off from the former accounting giant Arthur Andersen and is based in Bermuda, were not returned by spokeswoman Roxanne Taylor.
The company’s real estate broker, George Fox of Studley, confirmed the deal, but could not comment other than to say the company plans to move into the new office in September.
Kevin Crawford, a broker with Ritchie Commercial who also handled the deal, said about 125 Accenture workers could be accommodated in the space.
The news comes on the heels of last week’s announcement by one of the Big Four accounting firms, Deloitte & Touche, to double its workforce to 1,200 at its 225 W. Santa Clara St. location. In February, software maker BEA Systems announced it would relocate 800 to 1,000 employees to the former Sobrato Tower at 488 Almaden Blvd.
When Accenture arrives, it will join 12 other companies already in the 17-floor building, including Calpine, Bank of the West, and Merrill Lynch. And Accenture’s move, Ritchie predicted, means the vacancy rate in downtown San Jose, which has been as high as 20 percent-plus since the dot-com bust in 2000, will drop to single-digit territory by autumn.
That means the asking rents for top-notch downtown office space will continue their climb to $3 a square foot, ending San Jose’s days as a bargain in the Bay Area. By comparison, rents in Palo Alto are closer to $4 and tenants in San Francisco are charged $5, said Ritchie, who also has an office in San Francisco.
“For top addresses like this with view space in San Francisco, you could easily pay double our rate,” he said. Ritchie also noted that there is no subsidy for this deal, “nothing from the city,” referring to the $13.3 million subsidy San Jose gave to help BEA Systems move downtown.
The Accenture deal, in the works for several months, was complicated because it involved terminating the contract for one of three floors previously leased by Knight Ridder, the former parent company of the Mercury News. Knight Ridder was purchased in June by McClatchy, which turned around and sold a number of the former Knight Ridder papers. In August, McClatchy sold the Mercury News to its current owner, MediaNews Group.
Despite the sale of the Mercury News, Knight Ridder’s real estate holdings in San Jose, which include almost 18 acres on Brokaw Road and the downtown office lease, stayed with McClatchy, which also assumed responsibility for the landmark 57-ton sign atop the tower.
Although the sign was part of the negotiation, the brokers said the building’s owner, Forest City Commercial Group, decided that signage rights will go to a tenant that leases at least 60,000 square feet in the 330,000-square-foot tower, or will pay for the rights to a new sign. Accenture is simply not leasing enough space to be granted the rights to the oversize sign.
“The sign stays the way it is for at least another 18 months,” Ritchie said. “We will keep the Knight Ridder letters until the lease expires in October 2008.”
If a tenant does not take the signage rights by October 2008, the frame that held the Knight Ridder sign in place must be taken down within six months, Ritchie said.
“I would suspect sometime in the next 18 months that we’ll get a tenant in the building or someone expanding who, hopefully, will make a strong enough case to get the sign,” Ritchie said. “It’s very daunting to remove the sign.”
Ritchie said the Knight Ridder sign will be removed by stripping the letters off its frame, cutting them up and carting them down in the elevator.
But Crawford predicted that Forest City will have little trouble attracting a tenant willing to pay for the sign. “This sign is irreplaceable. Accenture wanted it.”
The sign, which is actually two signs that measure 1,000 square feet each and weigh 57,000 pounds apiece, has been controversial since it was erected in 1999, a year after Knight Ridder moved its corporate headquarters to San Jose from Miami. The city altered its sign ordinance from a maximum of 500 square feet to 1,000 square feet, then-Chairman Tony Ridder’s only request to move the company downtown. When lit up at night, the sign could be seen for miles.
In the Accenture deal, brokers Pat Cisneros and Chris Hygelund of Ritchie Commercial represented the landlord, Forest City; Ritchie and Crawford represented McClatchy, and Fox, of Studley, represented Accenture.
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