A modest, fully leased office building on Hamilton Avenue in downtown Palo Alto just changed hands for $15.8 million, a price that works out to $1,221 per square foot — one of the highest per-foot office prices recorded in Silicon Valley this year. The buyer, a Menlo Equities affiliate, picked up the 12,900-square-foot property at 555 Hamilton Avenue from an affiliate of Premia Capital, which had originally bought the building for roughly $13 million back in 2013.
The deal, first reported by The Real Deal, reflects just how tight the market has become for small office assets in Palo Alto, where the average asking rent of $8.47 per square foot is the highest of any city in Silicon Valley, according to the same report. That is well above the broader Silicon Valley office market, which averages roughly $5.22 per square foot. The building at 555 Hamilton Avenue was constructed in 1985 and is currently fully leased to multiple tenants.
Below-Market Leases Set to Expire
Part of the appeal for Menlo Equities may lie in timing. Existing leases at 555 Hamilton Avenue are priced below market, according to CBRE, as cited by the same report, and those leases are set to expire in 2027 and 2028. That structure gives the new owner room to raise rents as tenants roll over — a common play in a market where the overall Silicon Valley office vacancy rate dropped to 18.2% in the second quarter of 2026, down from 20.7% a year earlier, according to Cushman & Wakefield's Q2 2026 market report.
The Palo Alto purchase is a notably small, traditional office deal for a firm that has spent the past year leaning hard into an entirely different real estate category. Menlo Equities has been betting more on data centers over the past year, and the 555 Hamilton Avenue trade sits alongside a much larger, ongoing pivot toward digital infrastructure across the region.
A Parallel Bet on AI Data Centers
That pivot became formal in July 2025, when the firm launched a dedicated platform called Menlo Digital to acquire and develop data centers for AI, cloud, and hyperscale workloads, according to Menlo Digital. The strategy traces back to 1998, when the firm developed its first data center in Santa Clara. Just days before the Palo Alto office deal closed, Menlo Equities proposed a two-story, 444,400-square-foot data center on Charlotte Drive on Western Digital's South San Jose campus, requiring nearly 100 megawatts of power and an on-site substation, according to The Real Deal.
Menlo Equities has already shown it is willing to abandon office plans in favor of power-hungry infrastructure. Earlier in 2026, the company ditched previously approved plans for a 400,000-square-foot office and life sciences campus in Sunnyvale, replacing the multibuilding research and design campus with a single two-story data center and an adjacent PG&E substation — cutting the original footprint by roughly 200,000 square feet.
South San Jose Becomes a Data Center Battleground
Menlo Equities is far from alone in racing to plant data centers across South San Jose's industrial corridor. Prologis has proposed 1.7 million square feet across four buildings on a 159-acre site, and Goodman Group is planning a 414,000-square-foot facility, per The Real Deal's reporting. Developers Oppidan and Rockpoint Group also proposed a two-story, 152,700-square-foot data center requiring 18 megawatts of power on a 10-acre parcel at Embedded Way and Hellyer Avenue — a site Rockpoint originally bought vacant in 2022 for $15.7 million.
To keep pace with the demand, Pacific Gas & Electric doubled the capacity of its Santa Teresa Boulevard substation in South San Jose to 80 megawatts in 2026, with room noted for further expansion as power needs keep climbing, the outlet reported. Elsewhere in the office market, the priciest Silicon Valley office sale so far in 2026 remains Ellis Partners and Baupost Group's $310 million acquisition of the Great America Commons offices in Santa Clara from PGIM, a deal that traded at $487 per square foot and stood as the priciest sale on a per-square-foot basis in the second quarter.
Menlo Equities' Long Run in Silicon Valley Real Estate
Founded in 1994 by Henry Bullock and Rick Holmstrom, Menlo Park-based Menlo Equities made its first commercial acquisition at Apple's original Cupertino headquarters and has since executed more than $9.9 billion in total transactions, according to Menlo Equities. The firm now operates across four platforms — Core-Plus, Value-Add, Digital Infrastructure, and Development — a structure that helps explain why it can simultaneously close a small downtown office deal and chase a nearly 100-megawatt data center a few miles south.
The dual strategy mirrors a broader pattern playing out across the region as the AI boom reshapes demand for housing, office space, and data centers all at once. In Palo Alto's Stanford Research Park, Harvest Properties and TPG Real Estate bought Broadcom's 1.1-million-square-foot former VMware headquarters for $115 million, or $104 per square foot, in September 2025, a deal General Motors later built on by leasing nearly 340,000 square feet there in July 2026 to consolidate its Bay Area tech workforce, as The Registry reported — a stark contrast in per-square-foot value compared to the tiny Hamilton Avenue building's $1,221 price tag.
Hoodline has tracked the Broadcom campus sale as part of a wider reshuffling of Palo Alto office space. Pinterest similarly leased an entire building next to the Sunnyvale Caltrain station for its AI teams in March 2026 while giving up roughly 100,000 square feet at 395 Page Mill Road in Palo Alto. And some underperforming Palo Alto office parcels are headed toward housing altogether: developers submitted preliminary plans in July 2026 to replace three low-rise office buildings near the California Avenue Caltrain station with a 7-story, 98-unit residential building under the state's transit-oriented housing law, SB 79.
Menlo Equities itself has been active well beyond Silicon Valley, having quietly acquired a 15-story downtown Portland tower for potential data center conversion and pursued a roughly 1-million-square-foot data center campus redevelopment in Phoenix's Ahwatukee area, moves Hoodline has covered separately. Whether the 555 Hamilton Avenue leases produce the rent escalations Menlo Equities appears to be positioning for, or whether tenants relocate as the below-market leases expire in 2027 and 2028, remains to be seen.
