The fortunes and associated misfortunes of a robust Bay Area economy have by now spread pretty evenly across the region. A place where that is perhaps most visible is in the East Bay, which has traditionally been the first part of the region to enter a downturn, and the last to recover from it. Yet, in cities like Concord, which sit in the outer reaches of the region’s core, there is still some room for opportunity and an environment primed for growth.
Concord sits roughly 30 miles east of San Francisco, closer than San Jose, which is around 50 miles to the south. It can be reached by car in about 30 to 40 minutes (in some very rare instances), and in nearly as much time via BART. It is the largest city in Contra Costa County and boasts a population of around 130,000, which is larger than the city of San Mateo, and a warmer climate than most of the cities west of the Diablo Range. According to the 2010 census, the last one recorded, the city is the 8th largest in the Bay Area.
Demand, however, has remained steady from San Francisco, Oakland and Walnut Creek tenants
And while the city was mainly a bedroom community for San Francisco and Oakland over the last four or five decades, jobs within the city have increased steadily. Round Table Pizza is headquartered in Concord, and corporations with strong Bay Area regional ties, such as Chevron, Bank of America and Wells Fargo, have established extensive back-office operations there, diversifying the local economy.
This activity has delivered some interest in the market overall, and the city has been able to capitalize on that in development, as well as tenant interest. “The main commercial leasing drivers remain the existing housing and employee base and relatively cheaper rents for FIRE (finance, insurance, real estate) tenants being pushed out of San Francisco and Oakland,” said Scott Ellis, executive managing director of Colliers International, who works out of the company’s Walnut Creek office and tracks the market closely. More than 25 percent of Concord’s almost four million square foot office market is estimated to be occupied by financial firms, according to some estimates.
Some of the leasing activity in this sector included Wells Fargo signing a lease for 50,000 square feet at DivcoWest’s Concord Plaza (2000-2001 Clayton Road) earlier this month. In 2016, Wells Fargo signed the largest lease in the entire East Bay when it took 282,238 square feet at Swift Plaza, the 13-story property located at 1655 Grant Avenue in Concord. Last year, Bank of America signed a six-year extension for 396,000 square feet of space, also at Concord Plaza.
These drivers also brought development activity to the city, which has helped keep the commercial rates steady. “Concord delivered over 300,000 square feet of new office space to the market in the past 12 months, and rental rates have been impacted by approximately 10 percent. Demand, however, has remained steady from San Francisco, Oakland and Walnut Creek tenants. Downtown Walnut Creek office rents definitely peaked 2017 and have retreated by approximately 10 percent in the past two quarters,” Ellis added. “Vacancy has increased as downsizing tenants relocate to Class B spaces or migrate to cheaper markets. Almost all new leasing activity is occurring below $48.”
Yet, the vacancy bump has not been driven by increased inventory, rather a shuffling of tenants across markets, mostly. The lack of future new office construction could limit availability for FIRE as well as other tenants, and it could focus users on existing buildings, especially those closest to the downtown Concord BART station.
Looking at the fourth quarter of 2017 industry report from Colliers, absorption was negative for the year in almost all submarkets surrounding Concord, however, in the first quarter of 2018 report, most of those figures went positive, even though vacancy in Concord continues to inch up.
“Negative absorption is an interesting concept in a market with no new construction. If a 10,000 square foot space becomes vacant in March 2017 and leases in October 2017, is that 10,000 square feet of positive absorption or zero? Technically it’s zero. If that same space leases in March of the following year, then 2017 had 10,000 square feet of negative absorption and 10,000 square feet of positive absorption in 2018,” concluded Ellis. “So, negative absorption isn’t necessarily bad in a narrow window of time. In this market, it’s currently caused mainly by tenants downsizing and relocating within this market. Bank of America did vacate 180,000 square feet in Concord and left the market, but this is rare.”
Being a bedroom community for decades also means that Concord has strong housing and retail options. The median home price is roughly half that of San Francisco and some $200,000 below Oakland’s. And while apartment rents have been rising faster than some Bay Area communities, they are still roughly half of comparable rents in San Francisco. Residential builders have been active too, with more than 500 apartment units built or planned around the city’s downtown BART station.
Not surprisingly, retail amenities are also supporting the overall growth, especially in close proximity to downtown Concord. In the fall of 2017, a $100 million retail center, The Veranda, CenterCal Properties’ new 375,000 square-foot retail, dining and entertainment destination, opened near the existing Willows and Sun Valley shopping centers. Featuring restaurants, cafes and retail stores, The Veranda also has a LUXE cinema (with IMAX) and EV charging stations.