When Bisnow reported earlier this week that Moody’s was potentially relocating from San Francisco to Oakland, it didn’t, on its surface, seem like much of a shock. Over the last few months, more and more companies seem to be making their way across the Bay, lured by the promise of cheaper rents. It’s easy to predict a mass exodus of techies and related businesses to Oakland, but the truth is slightly more complicated. What is really going on in Oakland?
1. Branding problems
Oakland has plenty to offer, but one thing it doesn’t have is a shiny name, and for that reason the concept of a mass exodus to Oakland is overblown. While space is plentiful and relatively cheap, the reality is that tech stalwarts like LinkedIn and Salesforce are never going to make the move across the Bay because it would not be great for their brands. Right now, at the center of the tech industry, San Francisco is the coolest place in the country. For this reason, companies like Google have opened satellite offices there. Oakland, for all its benefits, simply does not have that same gravitational pull needed for recruiting.
2. Lots of industrial space
As we’ve said before, Oakland is home to a large stock of outdated industrial buildings. While this might not necessarily mean much to companies like Twitter, it’s great for those that produce physical objects. We’re seeing an uptick of interest from robotics and drone companies that require a light industrial component. There’s precious little space available in San Francisco right now, and virtually none of which provides adequate room for R&D and light manufacturing. Oakland is the perfect solution, with its wealth of empty industrial buildings and easy access to San Francisco via BART. These companies are still taking some office space in San Francisco, primarily to address the branding issue outlined above. They are keeping one toe in the city and a foot across the Bay.
3. It is cheap
There’s no question that Oakland is less expensive, and not by a little. Companies are paying half as much in Oakland as they are in San Francisco, which is shocking considering it’s only a 9-minute BART ride away from downtown SF. Average office rent in downtown SF is close to $45 a square foot, compared to $22 in Oakland. It makes sense that scrappy start-ups who are less concerned about where an established tech company “ought” to be would seek out a value space in the East Bay.