By Meghan Hall
In June of last year, Kaiser Permanente, Oakland’s largest employer, proudly revealed its plans for a new headquarters: a 1.6 million square foot development called the “Thrive Center,” which when delivered was expected to be the largest building in Oakland. However, Kaiser has recently informed city officials that they are pulling out of the project, and will be instead repositioning and investing in existing assets.
The San Francisco Chronicle was the first to report the news.
“It’s a pivot for Kaiser, and one that makes sense for their organization and members at this time,” Oakland Mayor Libby Schaaf told the Chronicle, who also stated that the decision was unrelated to coronavirus. “They’re reinvesting and improving their existing sites across the city, so the most important fact is that they’re staying rooted right here in Oakland. In the meantime, this is an incredible project that will attract an incredible new tenant.”
The property was to be developed with local firm Lane Partners. Upon its anticipated completion in 2023, Kaiser planned to move 7,200 national and Northern California Regional employees to the site. Kaiser also planned on selling existing buildings that it currently uses to Lane. The project itself was expected to cost about $900 million, and the project was expected to generate a one-time $23 million economic benefit, plus $15 million annually in local tax revenues to the city. Lane Partners declined to comment for this story.
How Kaiser’s decision—among numerous other market factors— will impact the Oakland submarket remains unclear. At the end of 2019, the Oakland office market was faring well, and the city led all major submarkets with an absorption gain of 437,291 square feet, according to a report released by Kidder Mathews. Oakland also led all submarkets with the highest amount of leasing activity, reaching 1.3 million square feet, and representing more than half of the East Bay’s office leasing total in 2019. Rental rates also continued to climb, hitting $4.53 per square foot. However, Kidder Mathews noted that development activity in Oakland and the East Bay had been greatly reduced with just two large-scale office projects in the East Bay pipeline: Ellis Partners’ The Key at 12th, located in downtown Oakland, and 2120 Berkeley Way, in Berkeley, Calif. The former, a 345,300 square foot office building is entirely pre-leased to Credit Karma and the University of California Office of the President.
In February of this year, TMG also unveiled renderings for its 875,000 square foot development, Telegraph Tower, just up the street from the planned Thrive Center. Groundbreaking for the tower is scheduled for mid-2020. When asked about how Kaiser’s decision may impact their plans, TMG stated they had no comment at this time.
As of this writing, the City of Oakland had not yet returned The Registry’s request for comment.