Despite rising Oakland office asking rents, developments are still difficult to pencil out.
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TMG Partners partner Tom Stubbs (above at a Bisnow event) said the biggest challenge in Oakland is making the numbers work for new development. Nobody wants to build a spec building.
“Oakland is a ‘build it and they will come’ market,” Stubbs said.
While he expects office rents to rise slightly this year, office rents need to rise significantly to make developments viable. Stubbs said construction and/or land costs still need to come down and suggested the city can help by streamlining the development permit process and waiving fees.
Oakland is a small market and is already getting picked over, he said, which may make new opportunities limited. He said the market will continue to tighten if there is no new development going forward.
TMG Partners finds Oakland ideal because existing office buildings are still much lower in purchase price than San Francisco. Downtown Oakland is transit-friendly and is a few minutes from San Francisco.
“It is also a place where young people want to live and work,” Stubbs said.
TMG Partners is expected to complete renovations of the 18-story 1330 Broadway this quarter. Renovations include a new main lobby and entrance, new common area finishes, and major elevator and building systems modernization. Bike parking and commuter showers also will be added.
Find out more at our Oakland State of the Market event Feb. 16.
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