Colliers International Q1 2014 Oakland Office Report

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Despite rather disappointing absorption numbers throughout many of the submarkets in the Oakland Metro region, asking rental rates were up on average 4 percent when compared to the end of 2013. Cautious optimism seems to be contagious as everyone in the East Bay patiently awaits the influx of tenants fleeing the hottest real estate market in the country. Property owners in downtown Oakland are probably the most anxious as several of them recently got into the game. Ellis Partners is no stranger to Oakland but its acquisition of 1111 Broadway is the first Class A investment by the firm in Oakland in a number of years. As reported last quarter, Harvest Properties also entered the Oakland – Downtown submarket with its purchase of 555 12th Street. Finally, Divco’s purchase of Lake Merritt Plaza completes the trifecta of Class A trades in the last ninety days. All three of these projects sold for approximately $270 per square foot. While this pricing is well below replacement costs it portends a strong belief that rents are poised for growth. Rumors abound of rent quotes in the low $40’s per square foot. We expect office investment activity to remain strong throughout 2014.

In other noteworthy news, significant improvements will be made to the Alameda submarket in 2014. Marina Village will soon undergo a much needed facelift as the project is being recapitalized by one of its investment partners, Brookfield. Brookfield acquired the B-note several years ago and will be completing a “friendly foreclosure” of the property. A much needed capital infusion will likely coincide with improving market conditions as surrounding markets like Emeryville and Oakland become saturated with tenants over the next several quarters. Alameda Point (formerly the Alameda Naval Air Station) is also poised for repositioning as the City of Alameda recently completed a lengthy Environmental Impact Report and will start taking fee title ownership of the base from the Navy. Much needed improvements to the infrastructure will be phased over the next several years as parts of the base are leased or sold. We anticipate some exciting developments in the near future on what many believe to be some of the best real estate in the Bay Area.

Residential markets continue to improve throughout the region as San Francisco continues to price out both buyers and renters. Signature Properties is breaking ground on the Brooklyn Basin project which will ultimately provide over 3400 residential units on the Oakland Estuary. A number of sites in downtown Oakland as well as the neighborhoods up Broadway are in play and will see construction cranes before the end of the second quarter.

 

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