This document provides an overview of the East Bay office market for the first quarter of 2010. Key points include:
- The overall East Bay office market saw a small decrease in occupied space.
- Vacancy rates remained steady around 20% and rental rates were largely unchanged.
- Several large leases were signed by government agencies in Oakland.
- Investment activity was slow with just a few small building sales in Oakland and Alameda.
East Bay Office and Flex Space Quarterly Report Highlights Emeryville and Oakland Markets
1. First Quarter 2010 • East Bay Office and Flex Space
EMERYVILLE & OAKLAND OFFICES
5980 Horton Street, Suite 100 • Emeryville, CA 94608 • Tel: 510.923.6200 • Fax: 510.923.6260
10 Clay Street, Suite 250 • Oakland, CA 94607 • Tel: 510.995.3560 • 510.995.3561
www.ccarey.com
2. EAST BAY OFFICE & FLEX SPACE• FIRST QUARTER 2010
EAST BAY OFFICE & FLEX SPACE• FIRST QUARTER 2010
TABLE OF CONTENTS
Coverage Map 1
East Bay Market Overview 2
Office Market:
Market Summary 5
Market Highlights 6
Historical Statistics 7
East Bay Tenant Activity 9
Tenants in the Market 10
Cornish & Carey Commercial East Bay Office and Flex Space Quarterly Report is based on a quarterly survey of
competitive Office, and R&D buildings. The data included in this report incorporates not only space presently
available on the market, but also space that we have been led to believe will come onto the market in the foreseeable
future.
Information contained herein has been given to us by the owner of the property or other sources we deem reliable.
We have no reason to doubt its accuracy, but make no guarantee, warranty or representation about it. All information
should be verified prior to lease or purchase.
3. EAST BAY OFFICE & FLEX SPACE• FIRST QUARTER 2010
EAST BAY OFFICE & FLEX SPACE• FIRST QUARTER 2010
COVERAGE MAP
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4. EAST BAY OFFICE & FLEX SPACE• FIRST QUARTER 2010
EAST BAY MARKET OVERVIEW
First Quarter, 2010 Office Summary On the investment side, no buildings of any significance
traded except for 80 Swan Way in the Oakland Airport
The East Bay Office Market for the first quarter of 2010 area. This 52,544 square foot 3-story office building was
can best be described as “flat”. For every square foot of foreclosed upon and auctioned on the courthouse steps;
space leased another became vacant as absorption across the prevailing bidder paid $1,580,000 ($28.75 PSF). This
the entire 25 million square foot market was negative building was originally put on the market by the owner at
25,991 square feet. Two of the largest leases signed were $4 million dollars, the CMBS loan balance was $3.2 million
government tenants with the US Bankruptcy Courts’ dollars.
renewal of their 38,000 square foot lease in Shorenstein’s
City Center, while the Social Security Administration Downtown Oakland
leased 35,000 square feet at 2100 Franklin, CIM’s newest
building. The Social Security Administration will relocate Downtown Oakland was the most active of the submarkets
from its current location in Downtown Richmond. Kaiser during the first quarter. The US Bankruptcy Court
Permanente renewed a 65,000 square foot lease at Harbor renewed their lease for 38,077 square feet at Shorenstein’s
Bay in Alameda. 1300 Clay Street. The University of California Office of the
President renewed their 23,000 square foot lease on the
The vacancy rate for the East Bay remains steady at 20.27% 14th floor of 1111 Broadway, also a Shorenstein building.
and effective rates stayed about the same throughout most Offices of Ben Gerwick, Inc. took 14,996 square feet at
of the markets – it is still a great time to be a tenant as 1300 Clay Street and DeVry University opened a new
there are some great deals out there to be had. The branch leasing 15,768 square feet at Shorenstein’s 505 14th
market is experiencing a “flight to quality” where tenants Street. The Social Security Administration leased a floor
can upgrade their spaces or move to a better building for and a half at CIM’s 2100 Franklin Street taking 35,000
the same rate or a lower rate than they had previously square feet. This group will be relocating from their
been paying. Market activity is good; we are presently present location in Downtown Richmond. At the Swig
tracking 68 tenants active in the market looking for a total Company’s 300 Lakeside building, law firm Foley &
of over one million square feet of space. Mansfield leased a 23,000 square foot floor, relocating from
1111 Broadway at City Center. The Downtown Oakland
On a bright note, toward the end of the first quarter we Class A market commands the highest rents in the East Bay
are beginning to see indicators that there may be some real with most leases in the $2.65-$2.85 PSF range, fully
growth in the economy, although in the East Bay much of serviced. Between Oakland’s two largest landlords,
this growth appears to be in the manufacturing sector. Shorenstein at City Center and CIM in the Lake Merritt
Alternative energy companies and solar power companies area, they control over 60% of the inventory in the
continue to be active in the market as venture capital and submarket.
government stimulus monies are flowing to these
industries. Emeryville’s Amyris, an alternative fuels The only other building which changed hands in Oakland
company, has filed papers to begin their IPO process. The this quarter was the Pacific Building at 600-610 16th Street.
healthcare sector also is active as aging Baby Boomers AB Chestnut LC bought the building in a foreclosure sale
drive growth in this sector. for $4,436,106 or $67.24 PSF. This 4-story Class C
structure was built in 1912.
No new large blocks of sublease space were put on the
market during the quarter. Sublease space only takes up The Oakland Class A submarket absorbed a total of 77,162
2.22% of the total vacancy of 20.27%, accounting for only square feet of space in the first quarter, perhaps indicating
about ten percent of the total vacant space in the market. that the “flight to quality” phenomenon is actually
Some observers question whether rents have much further occurring.
distance to fall, we believe the answer is “not much if any”.
Rents have fallen to the point of the “zero return Emeryville
transaction,” where the cost of the lease transaction and
putting in tenant improvements and fees are equal to or Software company Gracenote renewed and expanded its
close to the total net return that the Landlord will realize lease at US Bank’s 2000 Powell Street in Tower III of the
from the rental income stream. Most property owners will Watergate Project. The tenant took a total of 48,000
not go below this “zero return” threshold. square feet consisting of the entire 12th and 15th floors of
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5. EAST BAY OFFICE & FLEX SPACE• FIRST QUARTER 2010
the building. The Class A market had negative absorption renew. Absorption in Harbor Bay was negative 19,500
of 34,141 square feet and the Class B market in Emeryville square feet.
had a negative absorption of 46,826 square feet indicating a Berkeley
shrinkage of total space occupied across all product types.
Class A rents in Emeryville currently are in the $2.00-$2.35 There was 13,231 square feet of negative absorption in
PSF range, fully serviced, which represents a discount to Berkeley through the quarter. MSCI Barra downsized from
the Oakland markets of approximately $0.50 PSF. 59,000 square feet to 34,000 square feet and renewed their
lease at 1st Milvia LLC’s 2100 Milvia Street. SKM will be
As mentioned previously, alternative energy innovator marketing the remaining 30,000 square feet in the building,
Amyris has filed papers to begin an IPO which is believed which MSCI Barra previously occupied. Cobalt Law signed
could occur in the second half of this year, indicating the a 6,066 square foot lease at Eat/Work Development LP’s
health and strength of the capital flows for alternative 918 Parker Street. The law firm relocated from Bancroft
energy. Random House leased 9,162 square feet in TMG Plaza. Hydro Science Engineers relocated from Napa to a
Partners’ 6001 Shellmound. Class A vacancy in Emeryville is 4,909 square foot suite on the 2nd floor of 739 Allston
20.12%, almost a third of which is sublease space. Way. After subleasing within the building for a number of
years Northern California Cancer Center signed a direct
Jack London Square lease for 3,328 square feet with Disability Rights Advocates
at 2001 Center Street.
Ellis Partners’ new Jack London Market Building consisting
of 110,000 square feet of Class A space and 65,000 square A notice of default has been filed for the 2120 University
feet of public market and restaurants is shell complete and Avenue building. This 44,000 square foot building has
is scheduled to be opened in late 2010. The building is a remained almost totally vacant since Lawrence Berkeley
creative mixed use project with a public market style National Labs moved out of the building mid-2009.
gourmet market and sustainable cuisine on the first two
levels of the building. Richmond
Ellis Partners also completed a lease with solar installer Voxis expanded and relocated to take a total of 6,500
Sungevity for 20,000 square feet on the 3rd (top) floor of square feet at Burt Clausen’s 1160 Brickyard Cove. The
their 66 Franklin Street building. company was formerly located at 1150 Brickyard Cove.
There was a 32,000 square foot lease signed at 1401
Alameda Marina Way South, the Lessee is rumored to be a Bingo
parlor. In the hilltop area of Richmond, Landlords have
Software maker Wind River Corporation was acquired by indicated that Tenant tour activity is up substantially in the
Intel. This tenant had been trying to sublease 125,000 Blume Drive and Lakeside Drive areas. The Richmond
square feet of space but has taken this space off of the market absorbed 2,080 square feet in the first quarter.
market resulting in a positive absorption for the Marina
Village submarket of 109,876 square feet. Biotech Oakland Airport
innovator Arriva Pharmaceuticals closed the doors on its
business, putting 22,000 square feet of office/lab back on The Regional Center of the East Bay vacated approximately
the market in Marina Village. Yang Ming Lines signed a lease 60,000 square feet of space at Cranbrook’s 7677 Oakport
at Legacy’s Marina Village in Alameda and will relocate to Street moving to their new building near the San Leandro
the business park from its previous location in Oakland’s BART station. This vacancy coupled with other tenant
City Center. shrinkage led to a negative absorption of 94,812 square feet
for the quarter. In a trustee sale, 80 Swan Way, a 3-story
Wind River’s activity dropped the vacancy in Marina Village 52,544 square foot building sold. The sales price was
from 33.72% to 27.8%. $1,580,000 or $28.75 PSF. At a point several years ago,
raw land was selling in the Airport area for $25.00 PSF to
In Harbor Bay, Kaiser Permanente renewed their lease for give an indication in the drop in office values in this
65,000 square feet in 1451 Harbor Bay Parkway. It was submarket. This was a CMBS Loan.
rumored that this requirement was going to be moved to
Kaiser’s new Pleasanton campus so it was a vote of 8393 Capwell Drive also sold, a 21,064 square foot 2-story
confidence for this submarket that Kaiser decided to office building. The buyer was Hume Jung and the seller
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6. EAST BAY OFFICE & FLEX SPACE• FIRST QUARTER 2010
was the John E. Pessin Living Trust, the sales price was
$2,150,000 or $102.07 PSF.
The Oakland Airport has always been one of the most
economical markets in the East Bay. Some Landlords are
marketing space quoting asking rates of $1.10-$1.20 PSF,
fully serviced.
Conclusion
We’ve been hoping there was light at the end of the tunnel
for quite some time for owners of office buildings in the
East Bay. Based on some of the current economic trends
and other favorable happenings, it looks as though relief
may be on the way. It may take several years for a full
recovery to manifest itself but in the meantime, tenants can
take advantage of historical low rents in the market,
upgrade their spaces, and receive flexible terms allowing
for growth. We are hopeful that the rest of 2010 will bring
continued good news and revive the job creation engine
that we have historically been fortunate enough to
experience in the East Bay.
Best Regards,
Daniel Pivnick
(510) 923-9150
dpivnick@ccarey.com
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7. EAST BAY OFFICE & FLEX SPACE• FIRST QUARTER 2010
EAST BAY OFFICE & FLEX SPACE• FIRST QUARTER 2010
OFFICE - AVAILABLE SPACE
Total Total
Inventory Direct Sublet Total Vacancy Rental
Area Total SF Direct Vacancy Sublet Vacancy Available 3Q09 Rates **
$1.50-
Richmond * 2,153,517 605,724 28.13% 12,257 0.57% 617,981 28.70%
$1.85
$1.75-
Berkeley 2,558,666 324,364 12.68% 75,709 2.96% 400,073 15.64%
$2.45
$2.00-
Emeryville - Class A 2,557,268 335,534 13.12% 179,060 7.00% 514,594 20.12%
$2.35
$1.50-
Emeryville - Class B 1,331,081 183,504 13.79% 8,093 0.61% 191,597 14.39%
$1.75
$2.35-
Oakland - Class A 6,227,704 740,444 11.89% 136,506 2.19% 876,950 14.08%
$2.95
$1.50-
Oakland - Class B 2,972,483 726,268 24.43% 37,925 1.28% 764,193 25.71%
$2.25
$1.55-
Oakland Airport 1,975,828 544,646 27.57% 24,520 1.24% 569,166 28.81%
$1.95
$1.50-
Jack London Square - Oakland 1,435,330 276,202 19.24% 13,944 0.97% 290,146 20.21%
$3.00
$1.65-
Alameda - Harbor Bay 1,840,329 282,528 15.35% 40,712 2.21% 323,240 17.56%
$1.85
$1.60-
Alameda - Marina Village 1,659,874 441,902 26.62% 20,254 1.22% 462,156 27.84%
$2.00
TOTAL: 24,712,080 4,461,116 18.05% 548,980 2.22% 5,010,096 20.27%
* (Includes R&D Space)
** (Rental Rates are Class “A” Fully Serviced, except Class “B” Emeryville and Oakland)
OFFICE ABSORPTION
1st Quarter YTD Year Year
Area 2010 2009 2008 2007
Richmond * 2,080 (85,675) (85,099) 78,183
Berkeley (13,231) (4,841) (70,908) 41,689
Emeryville Class A (46,856) 42,537 (48,752) 23,552
Emeryville Class B (46,826) 32,503 (33,859) 49,232
Oakland - Class A 77,162 (201,667) (43,524) 275,349
Oakland - Class B (907) (9,238) (36,539) 46,380
Oakland Airport (94,812) 74,718 (176,031) (51,405)
Jack London Square - Oakland 19,326 (48,993) 7,077 26,797
Alameda - Harbor Bay (19,500) 47,940 (55,280) 122,545
Alameda - Marina Village 97,573 (100,800) (133,081) 117,391
METROPOLITAN TOTAL: (25,991`) (253,516) (675,996) 729,713
THE INFORMATION CONTAINED HEREIN WHILE NOT GUARANTEED HAS BEEN SECURED BY SOURCES WE DEEM RELIABLE. ALL INFORMATION SHOULD BE VERIFIED PRIOR TO LEASE OR SALE
SOURCE: CORNISH & CAREY COMMERCIAL – 5980 HORTON STREET, SUITE 100, EMERYVILLE, CA 94608 510.923.6200 FAX 510.923.6260
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8. EAST BAY OFFICE & FLEX SPACE• FIRST QUARTER 2010
OFFICE MARKET HIGHLIGHTS
Building Tenant Landlord City Size
1451 Harbor Bay Parkway Kaiser Permanente Limar Realty Corporation Alameda 65,000 (Renewal)
2000 Powell Street Gracenote US Bank Emeryville 48,000
1300 Clay Street US Bankruptcy Court Shorenstein Oakland 38,877 (Renewal)
2100 Franklin Social Security Administration CIM Group Oakland 35,000
2100 Milvia MSCI Barra SRM Berkeley 34,000 (Renewal)
1111 Broadway UC Office of the President Shorenstein Oakland 23,000
300 Lakeside Drive Foley & Mansfield SWIG Oakland 23,000 (Renewal)
66 Franklin Street Sungevity Ellis Parnters Oakland 20,000
505 14th Street DeVry University Shorenstein Oakland 15,768
1300 Clay Street Offices of Ben Berwick, Inc. Shorenstein Oakland 14,996
6001 Shellmound Street Random House TMG Partners Emeryville 9,162
LARGEST FISRT QUARTER 2010 OFFICE SALE TRANSACTIONS
Building Seller Buyer City Size (SF)
600-610 16th Street Affinity Bank AB Chestnut LC Oakland 65,974
80 Swan Way Credit Swiss Hamilton Zanz Oakland 52,544
SIGNIFICANT FIRST QUARTER 2010 OFFICE AVAILABILITIES
Building City Size (SF) Availability Direct/Sublease
1945 Broadway Oakland 200,000 Now Direct
2600 Hilltop Drive Richmond 150,000 (labs) Now Direct
2100 Franklin Oakland 142,000 Now Direct
55 Harrison Oakland 100,000 Now Direct
4655-4677 Meade St Richmond 82,000 (labs) Now Direct
2100 Powell Street Emeryville 75,000 Now Sublease
1201 Harbor Bay Parkway Alameda 61,000 (labs) Now Direct
1999 Harrison Street Oakland 61,000 Now Sublease
880 Harbour Way South Richmond 60,000 Now Direct
1111 Broadway Oakland 60,000 Now Sublease
1608 Fourth Street Berkeley 58,281 Now Sublease
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10. EAST BAY OFFICE & FLEX SPACE• FIRST QUARTER 2010
OFFICE HISTORICAL STATISTICS
Historical Direct Availability (SF) vs. Sublease Availablity (SF)
5,000,000
4,500,000 Direct
4,000,000 Sublease
3,500,000
3,000,000
Available Space (SF)
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
Historical Net Absorption (SF) vs. Vacancy Rates (%)
600,000 30.00%
400,000
25.00%
200,000
0 20.00% Vacancy Rate
Absorption
(200,000)
15.00%
(400,000)
(600,000) 10.00%
(800,000)
5.00%
(1,000,000)
(1,200,000) 0.00%
Absorption Vacancy Rate
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11. EAST BAY OFFICE & FLEX SPACE• FIRST QUARTER 2010
EAST BAY TENANT ACTIVITY – YTD 1Q10
BUILDING CITY PREVIOUS LOCATION TENANT LANDLORD SIZE (SF)
1 2000 Powell Street Emeryville Expansion Sony Corporation (Gracenote) US Bank 48,000
2 1300 Clay Street Oakland Renewal US Bankruptcy Courts Shorenstein 38,077
3 2100 Milvia Street Berkeley Downsize MSCI Barra SRM 34,148
4 2100 Franklin Street Oakland Richmond GSA - Social Security CIM 30,000
5 1111 Broadway Oakland Renewal US Treasurers Office Shorenstein 22,980
6 7901 Oakport Oakland Concord ITT Educational Services Ardenbrook 20,000
7 66 Franklin Street Oakland Berkeley Sungevity Ellis Partners 19,326
8 505 14th Street Oakland New Location DeVry University Shorenstein 15,768
9 1300 Clay Street Oakland Expansion Ben Gerwick Shorenstein 14,996
10 427 13th Street Oakland Jack London Square Rumsey Engineers Leslie Bldg. Assoc. 13,522
50% of Tenants Renewed or 5 out of 10 10 Tenants Compiling 256,817 Total Square Feet
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12. EAST BAY OFFICE & FLEX SPACE• FIRST QUARTER 2010
TENANTS IN THE MARKET – 1Q10
Tenant Demand by Submarket Desired
Tenant Demand by Desired Size (Richmond to Oakland)
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13. EAST BAY OFFICE & FLEX SPACE• FIRST QUARTER 2010
TENANTS IN THE MARKET – 1Q10
Tenant Demand by Business Type
(Number of requirements out of a total of 70)
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