Cushman & Wakefield Releases Q2 Report for East Bay Oakland Office Market
OAKLAND, Calif., July 23, 2019 – Cushman & Wakefield’s research department has released their second quarter 2019 market report for the East Bay Oakland office market. Below are the key findings from this report plus local expert commentary:
VACANCY AND OCCUPANCY GROWTH BOTH ON UPSWING
Vacancy in the East Bay Oakland office market was 10.5% at mid-year 2019, up modestly from a year ago, largely due to the new delivery of the 244,000-square-foot (sf) 2150 Webster building, that is unleased. Vacancy in the Oakland CBD was 10.3%, its first time above 10% in nearly five years.
Keith Reichert, lead research analyst for Cushman & Wakefield’s Oakland office, said, “Despite a modest rise in vacancy, occupancy has increased by a significant 443,600 sf over the past year market wide, with the second quarter of 2019 achieving more than 200,000 sf of new growth. Meanwhile, gross absorption, or leasing activity, totaled over 600,000 sf in the second quarter, with nearly two thirds concentrated in the CBD. This is a very good sign looking ahead.”
BIG TECH ADDITIONS AND KAISER’S BIG PLANS
In addition to the occupancy gains, the second quarter was also bookended by two major announcements. In April, San Francisco-based Credit Karma announced they would be occupying 110,000 sf at the under construction 1100 Broadway. And in June, Kaiser Permanente announced its plan to purchase the Eastline site at 2100 Telegraph. At 1.6 million sf (msf), Kaiser’s new campus, deemed Thrive Center, would be the second largest corporate campus in the Bay Area. Thrive Center will also be the first new high-rise office construction to break ground in Oakland since January 2018.
Reichert indicated, “Kaiser’s move is a pure consolidation play as they will vacate roughly 1.5 msf in five buildings in the Oakland CBD which will be returned to market, alleviating continued supply constraints in larger size ranges. The ultimate effect of this surplus of space hitting the market remains to be seen, though it will certainly create new opportunities for tenants who have large requirements with near-term timing.”
CONSTRUCTION, VIABILITY AND COWORKING
There was 625,000 sf of office product delivered in the second quarter—Uptown Station and 2150 Webster Street—the first major deliveries in the Oakland CBD since 2007. Though Uptown Station is delivering 100% preleased to Square, the company plans to sublet 150,000 sf on two floors. Square reportedly plans to build out this space as a coworking concept.
John Dolby, Executive Director with Cushman & Wakefield in Oakland, said, “In-migration from CreditKarma and Square, both from San Francisco, continues to showcase Oakland’s viability for large tech users. While with the latest high quality large blocks hitting the market, Oakland further remains an attractive alternative to nearby markets such as San Francisco, where large blocks of space are scarce.”
Ryan Hattersley, Executive Managing Director with Cushman & Wakefield in Oakland added, “Further, the coworking concept is also taking off in the East Bay with WeWork, for example, expanding its footprint in the East Bay by 225,000 sf in the last two years.”
RENT GROWTH FUELED BY SALE PRICING AND DEMAND
Office rents continued climbing in the second quarter, closing at $3.87 per square foot (psf) on a monthly full-service basis, representing an 10.8% year over year increase.
John Dolby said, “Rent growth in the past several years has been driven mostly by record breaking sale prices especially in the CBD, forcing a new generation of landlords to underwrite ever-increasing rents. Rents will continue climbing in the coming quarters as new modern product delivers and high-profile tenant migrations generate new interest from out of the market.”
A KEY OFFICE GROWTH MARKET IN THE U.S.
An emerging tech market, the East Bay Oakland office sector remains a bright spot across the U.S. office landscape, according to Cushman & Wakefield. Notably, in the second quarter markets that Cushman & Wakefield has identified as tech centers in our Tech Cities 2.0 report accounted for a net positive absorption of 4.7 msf across the U.S. office sector, or nearly all the nation’s 6.5 msf of positive office absorption during the quarter.
CLICK HERE to access East Bay Oakland Q2 2019 Office report.
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 51,000 employees in 400 offices and 70 countries. In 2018, the firm had revenue of $8.2 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.