PALO ALTO — A building at a prime downtown Palo Alto site has been bought by a busy developer, a deal that could provide clues about the strength — or weakness — of the retail strips in Silicon Valley’s downtown markets.
At present, Restoration Hardware occupies the property, a University Avenue retail operation that’s been a downtown Palo Alto fixture for a number of years.
Peter Pau, a veteran developer who heads up real estate firm Sand Hill Property Co., paid $10 million for the building, located at 281 University Ave. near the corner of Bryant Street, according to documents filed on July 8 with the Santa Clara County Recorder’s Office.
The twist in the deal: Pau bought the building with full knowledge that Restoration Hardware by the end of this year is expected to exit downtown Palo Alto and shift to a big flagship store at the famed Stanford Shopping Center.
“Peter is very bullish about downtown Palo Alto and about re-tenanting the building,” said David Taxin, a partner with Meacham/Oppenheimer, a commercial real estate firm. Taxin arranged the property purchase on behalf of Paul and Sand Hill Property.
The property purchase occurred at a time when downtown Palo Alto is attempting to heal — as is the case with virtually every downtown district in the Bay Area and California — from economic woes unleashed by coronavirus-linked business shutdowns that state and local government agencies orchestrated to combat the deadly bug.
“Restoration Hardware spent somewhere around $3 million to $5 million to renovate the building,” Taxin said.
The sellers, a group headed up a local family trust, attempted to sell the building for as much as $14 million.
“We think we got a pretty good deal on the building at $10 million,” Taxin said.
The next major challenge is to find a tenant for the building because Restoration Hardware expects to open its brand-new flagship at Stanford mall before the end of this year.
“Downtown Palo Alto has been seeing its issues, like every other downtown,” after the coronavirus and retail attempting to return to a new normal,” Taxin said.
The building totals 15,000 square feet, consisting of 7,500 square feet of ground-floor retail and 7,500 square feet of a basement, according to Taxin.
The result of Sand Hill Property’s attempts to find a new tenant for the building could provide clues about downtown Palo Alto’s recovery from its coronavirus ailments.
“Pau believes he can find a tenant and that the retail market in Silicon Valley is going to be strong,” Taxin said.