Could downtown Oakland become the next Bay Area ‘tech capital?’
Hines Development, best known for Salesforce Tower, also spoke at the economic summit
A new report on Oakland’s postCOVID economy is bullish on the city’s downtown, which analysts and at least one developer are betting will come back in a big way in 2021 and beyond.
Speaking at an economic summit hosted by the Oakland Metropolitan Chamber of Commerce Thursday, Beacon Economics founder Christopher Thornberg presented the key findings in the report and said he’s optimistic that downtown office space is going to be a key driver of the region’s economic recovery.
“Downtowns are not ending as a result of the pandemic. Quite the opposite,” he said. “Downtowns are
going to come back more important than ever.”
The city core gives businesses proximity to their vendors, clients and workers, he said, and a downtown office tower provides prestige that can’t be replicated elsewhere. Generally, however, businesses have been wary of setting up shop in downtowns because of high real estate costs and nightmare-inducing commutes.
The pandemic and the subsequent move to work from home might’ve changed that.
“When everybody who is already downtown shrinks their footprint, rents go down. What does that mean? It’s less expensive,” he said. “There’s fewer workers driving in downtown because they’re working form home one or two days a week, that means less commuting costs.”
At least one major developer seems to agree. Houston-based Hines Development, which developed Salesforce Tower across the bay, is planning a 622foot tall office tower at 415 20th Street in downtown Oakland that could be the tallest skyscraper in the city.
“It is an office building,” Senior Managing Director Paul Paradis said early in his presentation to the assembled Zoom crowd. “We do think people will be returning to the office to work and that there will be growth and demand, so that’s our general perspective on that.”
Thornberg, the economist, pointed at several encouraging data points for Oakland office space. Office rents in the Oakland metropolitan division, which covers Alameda and Contra Costa counties, were up 1.4% in the fourth quarter of 2020 compared to a year ago, but that’s still significantly cheaper than in San Jose and the San Francisco metro division, which includes San Mateo County.
Oakland’s 16.9% office vacancy rate in the fourth quarter was up 1.7% from the previous year and is in between San Francisco’s 11% vacancy rate and San Jose’s 19.3%.
But, Thornberg cautioned, the factors making downtown Oakland more attractive to businesses, including cheaper downtown rents, could also be in play in San Francisco and San Jose.
“This is when people are going to think about not going to Oakland and going back to San Francisco. You don’t want that to happen,” he said. “Grab it, take this opportunity, make downtown Oakland that new competitive tech capital.”
Also at the summit was a representative from Orton Development, which is working to redevelop the Henry J. Kaiser Convention Center near Lake Merritt. That structure, which opened in 1915 but has been closed since 2005, is expected to reopen with rehabbed event spaces and an auditoriumturned-coworking space for arts and nonprofit organizations.
Dee Dee Myers, head of the Governor’s Office of Business and Economic Development, also spoke during the summit in a conversation moderated by Oaklandish CEO Angela Tsay. She pointed to an increase in new small business starts in California as one of the metrics suggesting a strong economic recovery in the state.
“It’s been a very challenging year,” Myers said. “But we’re coming out of it in a very exciting way.”