Oakland CBD Office Vacancy Among The Lowest In Nation
More tenants are demanding space in Oakland. With more employees living in the Oakland and East Bay region, employers are turning toward Oakland as a viable alternative to the high rental rates in San Francisco, which are now over $70/SF.
Oakland’s office market continues to post some of the lowest vacancy rates of the Bay Area. Vacancy is at 6.7%, and Oakland’s central business district had the lowest vacancy of any downtown market in the country for the fourth straight year, according to CBRE’s recent report on Oakland/East Bay. CBD vacancy is at 4.5%. Vacancy in San Francisco’s CBD is about two percentage points higher.
Plenty of demand exists in Oakland, but a lack of space remains a problem. Tenant demand is for about 1.5M SF in Oakland/East Bay, 60% of which includes demands of more than 50K SF, according to CBRE. Since 2010, 720K SF of office was added to Oakland/East Bay. Over the last four quarters, 5.8M SF has been leased within the Oakland/East Bay market, according to Savills Studley.
With Blue Shield moving to Downtown Oakland, 601 City Center is expected to begin construction later in 2017. Construction at 1100 Broadway also is scheduled to begin this year. These two projects would add 900K SF of office in Downtown Oakland by the end of 2019. An extensive renovation at 2150 Webster St. from Lane Partners would add another 236K SF of office. The former AT&T building is currently vacant.
The Oakland/East Bay office market includes 28M SF of net rentable area. Total availability in Q1 was 12.4% and full-service gross asking rents were $3.43/SF. Net absorption was 61K SF during Q1 2017 overall. Class-B and Class-C net absorption was 106K SF, while Class-A totaled a negative 45K SF. The largest gains were in the Oakland CBD with 16K SF of net absorption due to the delivery of 16K SF of office at 1630 San Pablo Ave.
Average asking lease rates have grown 58% since Q1 2014, but CBRE does not expect a peak anytime soon. Class-A rates reached $4.33/SF for full-service gross rates, the smallest quarterly growth over the past 14 quarters. Rents are expected to continue rising, but at a slower pace this year. Rents should stabilize in 2017, according to CBRE.
Q2 2017 has been active thus far. Solar Mosaic signed a lease for 30K SF at Swig Co.’s Kaiser Center, and Oracle plans to lease 16K SF at TMG Partners’ 1330 Broadway building. WeWork also is considering 30K SF at 111 Broadway.