San Jose Business Journal — Commercial Real Estate Special Supplement
March 4, 2005
By Ruth Carlson
sanjose@bizjournals.com
"It's a horrifying experience," says Delyse Nash
as she recalls renting office
space in San Jose, After her third move in five years, the
president of DNA, a headhunting firm for financial pro-
fessionals, made sure she'd never have to move again.
Ms. Nash became one of the growing number of small
business owners who have bought commercial condo-
miniums.
“My controller suggested I buy my office," says
Ms. Nash "I asked her, ‘Why would I want a big build-
ing?’ The controller, who showed her the new commer-
cial condominiums on Technology Drive near the San
Jose airport, was apparently persuasive. Ms. Nash pur-
chased one of the condos and leased it to her firm.
Buying the condo, compared to renting, turned
out to be a wash financially, says Ms. Nash. "I only pay
$200 a month more now and the tax benefits are excel-
lent,"
she says. "Plus I'm benefiting from the appreciation of
the condo," Most importantly, she adds, “I never have to
worry about the rent increasing again. if I need more
space, I'll rent this condo to another business and buy a
larger one."
"Commercial condos have a large demand
that has hardly been tapped," says Geoff Davis,
president of San Jose's DBC Commercial Group.
Noting that little space is available for companies that
need between 800 and 2,000 square feet, he predicts that
some vacant buildings downtown will be converted into
commercial condos.
After the dot-coin crash and 9/11 attacks, many
commercial buildings in Santa Clara County sat vacant.
"Borelli (Investment Company) and others said let's con-
vert warehouses into smaller spaces and sell them as
condos," says Mr. Davis. "We did it out of necessity,"
says Ralph Borelli, president of Borelli Investment Com- the front door," he
pany in San Jose. He began converting vacant office says. "We make
buildings to commercial condos 15 years ago. "The mar- the condos turn-
ket was tough back then and selling the space provided key. They (the
an exit for us," says Mr.Borelli. Since then Borelli In- buyers) are not
vestment has been converting space, including the build sophiattcated real
ing occupied by DNA – by choice. "We've always been estate investors
involved in incubators andsmall spaces in free-standing and we make it
buildings, so commercial condos ware a logical exten- simple to manage
sion," he says. "Business really picked up in the South and easy to buy
Bay last year and I haven't seen any slowdown yet. It’s with 90% percent
a trend that is picking up steam across the country" financing." Many
commercial condo
"It's an exciting ride for us, very experimental," owners also obtain
says Robert Eves, president of Venture Corporation, a financing from the
Mill Valley firm that builds new commercial condomini- Small Business
ums. In 2001, he says, "Our market came to a screech- Association. Mssrs. Borelli and Eves say those who
ing halt as it did for everyone in Northern California. buy commercial condominiums run the gamut from ar-
Silicon Valley went from not a single square footof va- chitects to software firms.
cant office apace to 70 million square feet of empty
buildings," What turned things around for Venture Corp. Prospective owners should take into account factors
was aphone call from a dentist in Morgan Hill. "Ha was such as building maintenance. “1 was surprised at how
in practice with his father and after 27 years of paying high the condo fees were, especially since they didn't
rent," says McEves, "he finally convinced his dad that cover janitorial services," says Ms. Nash. Despite the
they should buy their office property and get the benefits added cost, she says she's very pleased with her decision.
of ownership that larger companies have enjoyed." The "Its one more notch in our belt," she explains.
dentist wanted a 2,200 square feel office and Mr. Eves, "Our clients know that we are here to stay… we own the
who was used to constructing business parks, didn't see building."
how he could make money with an office building that
small. A few days later he got two more calls from small RUTH CARLSON is a freelance writer based in
business owners who else wanted to buy their offices. Santa Cruz
"We thought we should look at this," says Mr Eves.
Venture Corp. built four small buildings in Morgan Hill
with space for up to six tenants in each and, says Mr
"Commercial condos have a
Eves, they sold out immediately. large demand that has hardly been
tapped”
Today Venture Corp. has commercial condominium
developments up and down the state. Typically, they are Geoff Davis
two-story buildings that look like town homes, explains DBC Commercial Group
Mr Eves.
“There are no elevators or lobbies, people can drive up
to their front door and see the name of their company on