February 27, 2019 Oakland Steps from San Francisco’s Shadow with Real Estate Surge
Oakland’s Real Estate Coverage was recently covered by CoStar.
Oakland has recently drawn leases by tech firm, Square, and insurance giant, Blue Shield of California, that total more than half a million square feet. Additionally, developers are planning almost 1 million square feet in additional office space, the greatest amount of new development in more than a decade in Downtown Oakland.
The crime rate in Oakland began to rise in the 1960s and 1970s which contributed to the city’s difficulty with attracting businesses. Although, as tech companies such as Salesforce and Facebook expand across the Bay Area at record speed, Oakland is becoming a popular alternative destination for a millennial workforce- and companies want to capitalize on them. While some companies are expanding into the Tri-Valley area, many firms have recognized that if they want to attract employees, they need to be Downtown. Recent research has shown that millennials and younger people like a downtown environment, where they can easily go shopping on a lunch break or grab a drink after hours.
Even with the recent surge in companies looking for office space in Oakland, the area has a 10.3% office vacancy rate. The rate has risen almost 1 percentage point in the past year. Oakland is smaller and more affordable than its high profile neighbors, San Francisco, and Silicon Valley, both for office space and residents. Average office rent in Oakland is $55/square foot a year compared with about $73/square foot a year in San Francisco. Although part of what’s fueling Oakland has less to do with the city than it does with the spillover demand from San Francisco. Fewer than a handful of spaces are available for companies that want more than 100,000 square feet of office space in the city; the office vacancy rate is 6.5%.
Oakland could benefit from tenants priced out of San Francisco and from growing companies unable to secure a large block of space in San Francisco’s Financial District. Blue Shield of California will relocate a number of employees from San Francisco to Oakland in a 200,000 SF deal. Additionally, the 657,000 SF under construction in 2017 and the 345,000 SF under construction in 2018 are the first meaningful amounts of new building to get started since 2006. There has also been approval for a 750,000 SF office building that will take up a whole city block.
Tech firm, Square’s, recent lease of Uptown Station exemplifies Oakland’s ability to attract marquee tenants. The arrival of Square could signal to other tech companies that Oakland is the next frontier in the Bay Area. Commercial real estate in Oakland is surging with the recent sale of the Tribune Tower, an iconic Oakland building at 409 13th Street. It was recently sold to Highbridge Capital Management for $48 million, more than double the $20 million paid for it in 2016. “Oakland is committed to attracting businesses whose values align with our community, whose workforce reflects our inclusivity, and whose greatest priority is the long-term prosperity of every Oakland resident,” said Oakland Mayor Libby Schaaf.
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