By: Katherine Billingsley, Research Analyst | Oakland-East Bay
As rental rates soar in San Francisco and Silicon Valley, tenants are increasingly exploring options in the East Bay. Current economic conditions in the two-county market provide a promising outlook for both investors and tenants alike. The unemployment rate in the East Bay is below California’s at 5.1 percent (California at 6.5 percent). Professional and Business Services is one of the leading industries in recent job additions, in line with the migration trends we’ve seen in the last five years. As startups expand in San Francisco and the Valley, professional firms have chosen the East Bay as a viable market to move their back-office operations. Over half of the tenants that have moved into the East Bay from outer-markets are represented by non-profit/back-office type users.
Demand growth in the East Bay has been on such a steady trend, that demand now exceeds supply. There are over 2.0 million square feet of outer-market requirements for the East Bay. Users in the small-to-mid size range have been finding more affordable options (relative to S.F. and S.V.) in the Oakland Metro, while larger users find that the 680 Corridor as well as the Tri-Valley have space to accommodate their requirements.
Transportation is an important factor for tenants to consider when moving employees to another location. Fortunately, the East Bay has BART lines that run along the major submarkets, even out toward the Tri-Valley area. Some office parks such as Bishop Ranch in San Ramon offer free bus transport from the BART stations to the office, while BART stations in Oakland are within a short walk to major employers. For instance, the 12th Street BART station is just below 1221 City Center, where Brown & Toland from San Francisco recently leased 60,000 square feet of space.
Oakland neighborhoods have experienced a positive transformation by the local community’s revitalization efforts. Nearby, Emeryville and Berkeley are one of the top markets in the East Bay for life science tenants, with major companies such as research giant Lawrence Berkeley National Lab and Aduro BioTech Inc. in Berkeley, who recently raised $200 million in venture capital funding in Q2. The Tri-Valley and the 680 Corridor are benefiting from a spillover of tenants as fundamentals tighten in the denser cities nearby. These markets offer the same amenities as Oakland’s booming CBD, such as BART accessibility, retail/restaurants, and not to mention Class A buildings with qualities and characteristics on par with Trophy assets in the city.