Rents Up In Oakland Office
Oakland office asking rents rose to an all-time high in 2016 and rents don't seem to be slowing down this year.
Average asking rents stood at $3.14/SF on a monthly full-service basis in Q4 2016, a 22% increase compared to $2.57/SF in Q4 2015, according to Cushman & Wakefield. Oakland's central business district, which includes City Center and Lake Merritt, reached $4.37/SF, a 17.8% increase.
Vacancy for East Bay Oakland came in at 9.6% last year, a 140 basis point increase from 8.2% at the start of 2016. Oakland CBD had a 290 basis-point increase in its vacancy rate to 6.8% from 3.9%, partially due to several floors of space on the market during the fourth quarter. Cushman & Wakefield also calculated an increase in large blocks of space over 20k SF available — seven spaces, compared to one or two previously. JLL reports a vacancy rate for the East Bay at 11.6% and Oakland CBD at 3.2% during the fourth quarter.
While the rush on office in Oakland appears to have slowed since 2015, demand will continue throughout Oakland with momentum from an increase in multifamily developments. In 2015, 1.6M SF of occupancy occurred from offices moving eastward from San Francisco and organic growth from existing companies. In 2016, moderate take-backs occurred with a net absorption rate of negative 419k SF, with negative 319k SF coming from Oakland CBD, according to Cushman & Wakefield.
Periphery markets had an uptick in absorption — Alameda, Emeryville and Oakland Coliseum/Airport markets had some of the largest leases. Alameda and Emeryville had increased leasing activity, partially from a lack of space in Oakland CBD, according to JLL. Big leases included AeroTrek expanding into about 17k SF in Alameda Center and Zymergen taking 30k SF at EmeryStation. An additional 265k SF from Wareham Development’s EmeryStation West (above) is expected to deliver sometime in the third quarter.
JLL clocks year-to-date investment sales above $1B with an average of $350/SF and a historic watermark price of $440/SF for Lake Merritt Plaza sold by Divco West to Clarion Partners. Other sales include Bentall Kennedy’s $47M purchase of Latham Square (above) and Verajoy Holding’s purchase of 1500 Broadway for $25M.
Learn more about Oakland office at Bisnow’s upcoming Oakland State of the Market event Feb. 16 at the Scottish Rite Center.
CORRECTION, JAN. 19, 8:45 A.M. PT: The square footage and completion date for EmeryStation West were incorrect in a previous version of this story. The story has been updated.