By Jon Peterson
San Francisco-based Shorenstein Properties and New York City-based MetLife are planning to start the development of the 602,000 square foot office development in Oakland called 601 City Center. This property is located at 601 12th Street in downtown Oakland and totals 1.38 acres.
“This is a development that we never would have started without some sort of pre-leasing being concluded. We were not willing to start this development on a speculative basis,” says Charlie Malet, president and chief investment officer for Shorenstein. An announcement was made earlier this week with a lease signed with Blue Shield for 200,000 square feet or about 1/3 of the building.
Shorenstein is expecting that once the project is started it will take 20 months to complete. The real estate firm declined to state what the development cost of the project would be.
The office market in Oakland can offer many benefits for companies looking to move there. One is that the current rents are much lower than San Francisco. “The existing rents for Class A office space in Oakland are about 65 percent of what they are in San Francisco. Another factor for us is that Oakland might have the best public transit system in the Bay Area. Our site has mass transit nearby in that we are located about two blocks from a BART station. This is something that is very important for many employers,” said Malet.
Shorenstein believes that there will be many potential tenants taking a look at its project. “I would think that this would include professional/law firms, major corporations and technology companies,” said Malet. The leasing efforts on the property going forward are being overseen by John Dolby and Dane Hooks of the Oakland office of Cushman & Wakefield. The Oakland office market remains tight with the vacancy for Class A space being 10 percent.
Shorenstein has owned the 601 City Center property for 10 years. It currently holds ownership in the property through a joint venture with MetLife. Malet declined to comment on how much is owned by each company.
The portion of the property that Shorenstein owns is placed into two of the company’s commingled funds. These are Shorenstein Realty Investors Eight and Shorenstein Realty Investors Eleven. Fund Eight was formed in 2006 with $1.1 billion of committed capital with a $100 million commitment from Shorenstein. Fund Eleven was put together in 2011 with a total capital raise of $1.22 billion. Shorenstein made a $75 million co-investment into this fund.