Global Spotlight - Oakland, California

Strong Transport and Big Development Plans Keep Oakland’s Horizon Looking Bright.

Oakland is the shipping transportation hub of the San Francisco Bay Area and Northern California. The port of Oakland is the fourth-largest container port in the United States and 20^th in the world for container volume. Similarly, Oakland International Airport is one of the fastest growing airports in the U.S., having transported 648,000 tons of cargo and 14.6 million passengers in 2007.

Despite the industrial market being dominated by older manufacturing and warehouse buildings (built in the 1940s-1970s), vacancy has remained tight with a negligible amount of net absorption. Overall vacancy rates, asking rates and absorption statistics have remained stable in Oakland and throughout the East Bay market as surrounding areas have had large swings in momentum over the past decade.

The Oakland office market has grown a diverse tenant base that includes professional services firms, high-tech companies, government and non-profits. As a result, Oakland has become less susceptible to major market fluctuations. Additionally, the stability of the Oakland market has led developers to build new office buildings over the past few years. Two major projects are being completed that will add over 350,000 SF of new office space for the city.

Green buildings are on the way. Shorenstein plans to build 601 City Center, a 23-story tower with over 550,000 SF of Class A office space. With an expected LEED Gold Certification, it will be the East Bay’s largest “green” office building. SKS has plans to build a 20-story, 320,000 SF office building in downtown Oakland, which will achieve LEED Silver certification.

While the economy is stalling in response to the credit crisis, the fundamentals of the warehouse and manufacturing markets remain strong and have not seen an extensive drop in property value or volume of deals made. In the multi-family sector, rents have climbed significantly in the past four quarters and transaction volume has slowed, which has created opportunities for investors and a slight increase in capitalization rates and expected IRRs (Internal rate of return).

Comments

[Commerical Real Estate]

It's great that Oakland is stable. So many other areas are not. Great article.