Report finds Oakland downtown nation’s tightest
OAKLAND >> The office market in downtown Oakland is the tightest in the nation, with lower office vacancy levels than even those in business centers such as Manhattan and Boston, a new report revealed Wednesday.
Both downtown Oakland and downtown San Francisco boasted office markets with vacancy rates that were lower than Manhattan’s three principal office districts, commercial realty brokerage CBRE reported.
“The growing tech sector continues to drive occupancy” in the Oakland and San Francisco
downtowns, CBRE stated.
During the first quarter of 2018, the office vacancy rate was 5.3 percent in downtown Oakland, 5.7 percent in downtown San Francisco and 6.5 percent in Manhattan Midtown South.
Downtown San Jose posted an office vacancy rate of 11.9 percent, CBRE reported — a healthy level, but high enough to keep San Jose out of the top 10 downtown office markets.
With tech giants such as Google, Adobe Systems, Facebook and Apple buying or leasing properties for major campus expansions in Silicon Valley, vacancy rates could dwindle in markets such as downtown San Jose.
Mountain View-based Google plans a transit-oriented community of offices, homes, retail and restaurants in downtown San Jose, a development of 6 million to 8 million square feet where 15,000 to 20,000 of the search giant’s employees could eventually work.
Plus, Adobe Systems intends to expand its threebuilding downtown San Jose headquarters by adding a fourth office tower on an adjacent lot.
Projects such as the Adobe and Google developments could spur other office development in downtown San Jose.
In the East Bay, demand for office space in downtown Oakland has surged as skyrocketing office rents in San Francisco have prompted some companies to move across the bay.
“Downtown Oakland offices have seen expansion from San Francisco, not just in tech, but primarily in non-tech companies that want to stay in the Bay Area but find the rents in San Francisco too high,” said Lexi Russell, a senior research analyst for CBRE in Northern California. “Companies are finding it beneficial to relocate to Oakland because so many of their employees live in the East Bay and the rents are less expensive.”
San Francisco’s downtown has boomed with new construction, but the building binge isn’t enough to keep up with tenant demand.
“Even though 2.9 million square feet of new construction will be delivered in San Francisco this year, it will provide little relief to the tight market conditions,” CBRE stated in its report. That’s because roughly 74 percent of the newly built offices downtown are already leased to tenants even before the towers open their doors.
In downtown Oakland, low vacancies could shove office rents higher. That dynamic, in turn, might encourage developers to construct new office towers in Oakland.
“Developers are starting, or musing about, new office towers in downtown Oak- land,” Russell said.