Presidio Bay Ventures is taking another gamble on an office market rife with high vacancies.

The San Francisco-based developer broke ground in July on a ground-up office development at 388 Cambridge Ave. in Palo Alto. With still-high interest rates and soaring construction costs keeping shovels at bay along with depressed office demand, only a few developers have attempted to build new office projects in the Bay Area since 2021.

“It’s a very high-end Class-A project, and with that comes a pretty hefty price tag,” for both the owner, Presidio Bay, and potential tenants, said Newmark Executive Managing Director and Market Leader for Palo Alto Christian Prelle.

"With the high rents of $10.50 a SF triple-net, you’re not getting looks from tech start-ups," Prelle said.

Palo Alto's office vacancy rate in the second quarter was 24.8%, according to CBRE, lower than downtown San Jose and San Francisco, but higher than the overall average in Silicon Valley.

Newmark is chasing deep-pocketed professional services firms on behalf of Presidio Bay, including AI, law and private equity shops, Prelle told Bisnow.

"The primary goal is to lease to a high-caliber tenant with great credit on a long-term basis, at a high rent," he said.

Although no leases have been signed at the property, Prelle remains confident that a tenant will sign a deal after the holidays in the new year.

Presidio Bay expects hotel-like amenities and services to lure tenants, company founder and Managing Principal Cyrus Sanandaji said.

In his mind, three amenities stand out: the steam rooms, cold plunges and private outdoor decks.

While the entire Silicon Valley market struggles with high vacancy rates, Prelle said the quality of 388 Cambridge differentiates it from other office buildings.

"Instead of having tenants, we have customers or members," Prelle said. "And that's what [Sanandaji] tries to create in his portfolio. We do the same thing for DivcoWest, where we have three different campuses where everybody has access to the programming, whether it's yoga classes or food programming or events or gyms."

Presidio expects 388 Cambridge to achieve LEED certification and net-zero operations.

388 Cambridge has 3,400 SF of ground-floor boutique retail space available for lease, which will be overseen by CBRE.

"The retail spaces in these projects often exceed market expectations," Alex Sagues, senior vice president at CBRE, told Bisnow in a written statement. "For instance, retailers at Springline, a comparable but larger project, are performing exceptionally well, and we anticipate similar success here."

Presidio Bay has another office project going on in San Francisco. In March, the firm filed plans to redevelop 60 Spear St., (now known as 88 Spear St.) an 11-story, 175 SF office building into an "office resort."