Market Updates

East Bay Market Report April 2023


The East Bay had been leading the Bay Area in housing development for years, consistently outpacing San Jose and San Francisco. New projects are typically aimed at higher-income renters, but the inventory is still a welcome addition in a region with significant affordability challenges. And despite leading all metros in population growth in recent years, the East Bay still offers more affordability than other Bay Area regions. For these reasons, East Bay demand is expected to remain steady over the mid-term as new deliveries taper slightly.


Demand growth for apartments in the East Bay has been supported through substantial population and employment growth, which outpaced the national average over the past decade. The East Bay leads all Bay Area markets in population growth, having added over 250,000 residents since 2010. A net of 970 units has been absorbed over the past 12 months and the vacancy rate is tracking at 7.5%.


Over 18,000 units have been added on a net basis over the past five years. There are currently about 5,900 units in the pipeline, compared to the five-year average of 8,300 units underway. The current pipeline will expand the metro’s inventory by another 3.1%. Most submarkets in the East Bay have experienced at least some development activity, but Downtown Oakland has been the focal point in recent years.

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The East Bay office market has been adversely impacted over several years. Companies are assessing employee productivity in new working arrangements and analyzing the long-term costs of current office footprints. The current outlook remains murky as occupiers seek cost-saving options in their real estate portfolios.


Many tech tenants could hamper the market in the coming periods. Both Twitter and Meta have space in the market and announced significant layoffs with more announcements coming regularly. However, the impact of these layoffs on the office market remains to be seen, as many firms were already operating with either a fully remote or hybrid workforce, reducing their footprint requirements. Biotech and life sciences continue to be drivers of current demand.


When looking at active construction, it is becoming clear that developers slowed their pace. There is currently 130,000 SF of construction underway. Development levels will stay low for the foreseeable future as availability remains too high to justify adding inventory to the market.

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There is roughly 4.4 million SF due to complete in 2023, the highest total since 2002, leaving the market exposed to oversupply risk in the coming quarters. A general slowdown in leasing activity is expected as increases in interest rates and fear surrounding a slowing economy grow.


High-tech manufacturers have been leasing in large numbers in the East Bay. However, most manufacturing-related leases in recent months have come from firms in the electric vehicle or renewable energy infrastructure sectors. The diversity of occupiers bodes well for the market overall.


As the economy slows and occupier demand wanes, there is an increased market oversupply risk. Current levels equate to 2.0% of the market’s inventory, fortunately about half of what is currently underway is already leased or owned by tenants, including Tesla, Amazon, PacPride Distribution, and FedEx. The remaining inventory of unleased projects currently under construction is also spread fairly evenly along the I880/I-580 corridors in areas such as Fremont, Hayward, and Richmond, meaning that no individual submarkets are being faced with an overwhelming tally of new supply

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The effects of the pandemic brought significant operational challenges for many retail tenants leading to slowing leasing activity and negative net absorption. Investment activity stalled in the aftermath of the pandemic but began to pick up again in 2022, but the number of transactions taking place is still limited. Deceleration is evident early in 2023 as interest rates continue to rise, limiting buying power of potential investors, eroding property values, and expanding cap rates


Underperforming national retailers had announced store closures in the years leading up to the pandemic, and in 2022 more national tenants such as Bed Bath & Beyond, Tuesday Morning, and Party City among others, contributed to occupancy losses. In 2022 moveouts came from a number of different properties with nearly 15 new vacancies of 25,000 Sf or more, all of which come in the market’s more suburban areas like Walnut Creek and Concord.


There is only 260,000 SF under construction in the metro, adding 0.2% to inventory. With uncertainty surrounding population dynamics and income levels in the East Bay, it is unlikely that development levels increase significantly in the near to medium term. Additionally, some construction materials can be difficult to source affecting completion dates and putting the timing and viability of the project in doubt.

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*Source: CoStar

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