Office leasing in the East Bay has yet to pick up speed, with vacancy remaining flat in most areas or at best inching up during the second quarter.
The largest office deal during the second quarter involved John Muir Health taking 144,000 square feet at 1450 Treat Blvd. in Walnut Creek. The move, however, had little impact on vacancy since the tenant is moving from space within the same market.
Leasing activity in the inner East Bay was relatively quiet with the only major deal being the University of California, Berkeley, taking about 93,000 square feet in Berkeley Crossing, a 120,000-square-foot building at 1608 4th St. in downtown Berkeley, owned by Strada Investment Group, primarily to house administrative operations.
“To date, the East Bay has not benefited from a significant spillover effect from San Francisco,” said Tom Maloney, managing director of Jones Lang LaSalle in the East Bay. The San Francisco office market has been brisk, due largely to a robust technology sector that gobbles up space at a premium.
Vacancy in the Interstate 80 and 880 corridor dropped slightly to 18.5 percent during the second quarter from 18.9 percent during the first quarter, according to CBRE. In the Interstate 680 corridor, vacancy was 20 percent and in the Tri-Valley, it reached 18.4 percent.
Bishop Ranch in San Ramon experienced a strong flow of leases during the second quarter with several deals, including KB Home taking 17,000 square feet, Kraft taking 25,000 square feet, and a division of Nestlé taking 13,000 square feet.
As with most deals in the East Bay in recent months, many of the last quarter’s deals involved relocations from inside the market, but that could change soon as leasing rates rise in other parts of the region.
“As San Francisco rents reach more than $50 a square foot — prices not seen since prior to the recession — and technology tenants continue to expand their space requirements, we expect that traditional, non-tech users will be priced out of the San Francisco market,” Maloney said.
Leasing rates for Class A space in Oakland range from about $28 to $35 per square foot — a bargain compared with San Francisco, according to Cornish & Carey Commercial Newmark Knight Frank.
Most of the prospective tenants shopping for space in the Interstate 680 corridor of late had requirements ranging from 3,000 to 25,000 square feet, said Andy Schmitt, a broker with CBRE in Walnut Creek.
“There are currently fewer large 50,000-square-foot active users in the market when compared to fourth quarter 2011 through second quarter 2012, but we continue to see large user interest in the remaining big blocks of space in the I-680 corridor.”
In Oakland, Clorox put 150,000 square feet of office space in its companyheadquarters on the market for lease after moving hundreds of workers to Pleasanton.
That has pushed up vacancy in the inner East Bay, said Bill Nork, a broker with Cornish & Carey.
Wareham Development recently unveiled its new, vacant 99,000-square-foot EmeryStation Greenway building in Emeryville.
With rents in the Peninsula and San Francisco soaring, Nork said, “we’re hoping that trickles down our way.”
Blanca Torres – San Francisco Business Times