East Bay landlords await West Bay tenants
East Bay landlords and brokers patiently await a windfall of west bay office tenants, but in the meantime, leasing activity was relatively solid in 2013. In Oakland and the Interstate 880 and 80 corridor, the market ended the year with positive absorption of 101,000 square feet, according to Cassidy Turley.
The Interstate 680 corridor boasted positive absorption of 179,720 square feet, according to CBRE.
Overall, vacancy stood at 16.3 percent in the inner East Bay and 13.8 percent in the outer area.
Leasing was strong in submarkets like downtown Oakland and Lake Merritt, downtown Walnut Creek, San Ramon, Pleasanton and Concord.
Emeryville, which maintained tight vacancy the past few years, ended 2013 with 34,661 square feet of negative absorption, but nonetheless had solid leasing activity including the largest East Bay lease of the fourth quarter with Art.com expanding into 72,000 square feet.
In both the inner and outer East Bay, few leases surpassed 50,000 or even 25,000 square feet. Those leases do add up, but many industry insiders seem to be holding their breath for a blockbuster deal like a major headquarters move or something more than 100,000 square feet.
“We expect occupancy growth to pick up in 2014, with Oakland’s (central business district) markets continuing to lead the way,” said Cassidy Turley. “San Francisco tenants who signed deals in 2009 and 2010 when rents were at their lowest point are now facing renewals in a marketplace where many of them will be facing rent increases in excess of 50 percent. This is driving many to seek out the East Bay’s cheaper rents. Consequently, we expect an increase in demand from tenants relocating in search of less expensive space, particularly with BART access.”
During the past year, several institutional buyers snapped up buildings in the East Bay hoping to capitalize on the market’s potential. That includes deals like Oakland City Center buildings going to buyers like Harvest Properties, Ellis Partners and Strada Investment Group and recent news of Tishman Speyer picking up California Plaza in Walnut Creek.
“Investors were looking at the investment trend where you’re reaching over $700 per foot in San Francisco,” said Ed Del Beccaro, head of Transwestern’s East Bay operations. “You can still get buildings below replacement cost in the East Bay.”
So, the big question remains, when will tenants start to see the value of the East Bay and sign more leases?
Source: Blanca Torres - San Francisco Business Times
Dy Associates is an Oakland Real Estate company specializing in commercial, home and investment property in the Oakland and East Bay Area. We provide real estate services including buyer agent, seller agent, short sales, commercial and investment acquisitions, loan facilitation, hard money lending, financing assistance property management. Articles are provided as information only. We do not provide legal or general investment advice.