Office Condos Tap a Diverse Market
Ownership brings sense of security, flexibility in achieving firm’s goals
By Jon Ann Steinmetz, San Jose Mercury News, February 28, 2006
When the Ringwood Business Center started construction in 2004, the developers quickly discovered their location was even better than they realized.
“It was right smack dab in the right community — a highly populated Asian community in the Berryessa area,” said Larry Bengiveno, vice president of development for Borelli Investment.
|NUMBERS: San Francisco-based TMC Development arranges federal loans for small businesses. Here are some of its statistics for the period of January 1, 2001 through February 1, 2006:||
901: Number of commercial loans approved
44: Commercial condo loans approved by TMC
55%: Minority buyers of condos
26%: Minority buyers of non-condo properties
The project of commercial condominiums — small office spaces that business owners can buy rather than rent — generated so much interest that the company started marketing to Asian buyers in Chinese-language newspapers. CEO Ralph Borelli has been a guest on Chinese radio and TV real estate shows.
“We’re tapping into that market as best we can,” Bengiveno said. “It’s very important to locate in an area where they want to be — they are the buyers. And you could be five blocks off and it could affect your sales.”
Local office condo buyers are a diverse bunch in general. According to TMC Development, which arranges federal loans for small businesses, more than half of Bay Area office condo buyers since January 2001 have been classified as members of minority groups.
Sixty percent of the owners at Borelli Investment’s four San Jose office condo complexes are Latino, Indian or other Asian-American. At Venture Corp.’s Venture Commerce Center in South San Jose, 42 percent of the 28 buyers are non-white; another Venture property in Newark is 100 percent Asian- and Indian-owned. Businesses include real estate, financial planning, construction, engineering and law offices.
Owning vs. leasing
Commercial condominiums accounted for all of Silicon Valley’s new office construction in 2005 — 348,000 square feet, according to brokerage NAI BT Commercial. Condo units, typically 750 to 3,500 square feet, allow small-business owners to buy their own space rather than lease, an option that has been popular with interest rates near historic lows. Many purchases are financed through Small Business Administration loans with 10 percent down.
Most businesses lease their space, and ownership is a relatively new phenomenon. Several complexes — some new construction, others converted vacant buildings — have opened in the past year in the South Bay, mostly in San Jose. Last month, Keenan Lovewell Ventures opened The Vineyard, a 35-unit complex in Mountain View.
Besides tapping into a growing demand for small office space, Borelli and other developers are benefiting from Silicon Valley’s diverse population of entrepreneurs.
“The Chinese always believe in land,” said broker Tenny Tsai of NAI BT Commercial, who works with many Asian clients. “Condos don’t really have land, but we feel if everything else fails, we still have the building; we still have the soil. You can control your own destiny.”
For some entrepreneurs, it’s a nuts-and-bolts matter based on finances and personal preference.
“It makes more sense to own rather than to lease, and it makes more business sense to have an asset vs. purely a liability,” said real estate broker Bernice Johnson McHenry of Simply Success, who is a member of the National Coalition of 100 Black Women. She and business partner Carla Hudson moved into their office at the Venture Commerce Center in October.
Fred Wikkeling, who owns Exit Strategy Realty with his wife, Jeannette Williams, agreed. “It’s an opportunity to have your own rather than renting from someone else,” he said. “I’m not sure why it’s mostly minority, but everyone I talk to as owners saw it as an opportunity to own.
Raj Budwal, a financial adviser, considers his $675,000 office his retirement investment.
“I’m self-employed; I don’t have a retirement plan or 401(k),” he said. “If I’m paying rent, I’m just throwing money away day in and day out and I’m not getting anything.”
But for others, the ability to own a piece of commercial property, no matter how small, takes on a deeper significance.
“It’s a big thing in the Indian culture to own your own real estate. It’s something people yearn for,” said Harpreet Chadha, who owns two units at Ringwood, for Legacy Resources, his estate planning firm, and Heritage Ventures, owner of the Una Mas restaurants.
For Realty World franchise owner Yasmin Rodriguez, buying a 1,350-square-foot space at the Venture Commerce Center was the fulfillment of a personal goal — and one that was a long time coming. Her Small Business Association loan took months longer than she expected, and she lost out on the larger condo she had hoped to buy. Still, she says it was worth the sacrifice.
“It’s definitely something I’m very proud of as a young Latina businesswoman,” she said.
“I walk in every day and I open that door and have that key in my hand, and I know that it’s something I own, and it’s something that’s pretty to look at, and clients appreciate it.”
Rodriguez and condo neighbor Wikkeling said they were so interested in buying their own space that they’d come take pictures during construction.
“I’d come here every day and watch them put the walls up,” Wikkeling said.
“I have pictures from the time the dirt was out here,” said Rodriguez, who recently persuaded a friend to buy a unit in the same complex.
Chadha likes owning his properties to provide financial stability and to have something to pass on for posterity. For now, he enjoys the autonomy as well.
His rental office had two offices: one for him and one for his assistant.
“Here, I have three offices and three cubicles and a very nice conference room, and I can walk into it anytime I want.”
Golden Bay Properties owner Alex Ayala agreed. He bought his own office after being frustrated with landlords who didn’t maintain rental properties to his standards.
“There’s this belief that real estate offices are supposed to be nice,” he said. “It was very difficult out there, so I just decided to buy my own and do the tenant improvements.”
David Ocampo, principal of Milagro Marketing, wanted the freedom to express the creativity that’s his stock in trade.
“The type of business I’m in, you always want to represent yourself in kind of a fresh, funky way. And when you’re renting, it’s hard to drop the hardwood floor in and do the molding that you want and paint the walls.”
His $290,000, 750-square-foot unit at Ringwood with mustard yellow and blue walls boasts custom-built desks and an abundance of natural light.
The light is no coincidence. Borelli and Bengiveno say they consider feng shui — the Chinese art of positioning objects for harmony and balance — when they build now.
“We pay attention to our addressing, the way a building faces. We no longer bisect windows with trees or poles,” Bengiveno said.
“Our clients are teaching us how to sell product to them.”
Contact Jon Ann Steinmetz via email@example.com or (408) 920-5073.