San Francisco Business Times - March 28, 2005
http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2005/03/28/focus4.html

REAL ESTATE DEALS OF THE YEAR
Best Office Lease/Oakland
Winner: Ask Jeeves lease at 555 City Center
by Ryan Tate

Shorenstein Co.’s second courtship of Internet search firm Ask Jeeves unfolded like the tentative reunion of two ex-lovers.

he Emeryville firm had first hooked up with the landlord in 2000, agreeing to lease nearly 160,000 square feet at Shorenstein’s soon-to-be-completed highrise at 555 12th St. It was a short and unhappy relationship: By 2001, the Internet bubble had burst, and Ask Jeeves paid $16 million to get out of the lease even before it moved in.

Ask Jeeves remained at existing office space in Emeryville, but by summer 2004, the company was recovering and its 70,000-square-foot lease there was expiring. The firm again began eyeing up downtown Oakland, which boasted more restaurants clustered near office buildings and better BART access.

It set a date with Shorenstein to re-tour 555 City Center, the sort of gleaming downtown office building that impresses the corporate types to whom Ask Jeeves increasingly sells services and advertising.

“I would say there was apprehension on both parties when they came out and looked again,” said John Dolby, vice president for leasing at Shorenstein.

Still, a longtime mutual friend, Ask Jeeves broker Matt Elmquist of Aegis Realty Partners, helped the two sides work past the tension. Elmquist had represented Jeeves back when it had first dealt with Shorenstein, and had leased other tenants into city center subsequently, including Clear Channel.

Ask Jeeves had other suitors as well — several more Class A building owners wanted the suddenly resurgent Internet firm as a tenant. Shorenstein ultimately won out, in part by offering the company a sign on top of its prized office tower.

One thing Ask Jeeves didn’t get was a single penny of the $16 million it paid to get out of the previous lease. “Just like we didn’t get the old (dot-com-level) rent back, they didn’t get the fee,” said Dolby.

Though roughly 14,000 square feet smaller than its Emeryville lease, Ask Jeeves’ space at City Center spans two and a half floors and brings 250 jobs into the city. After taking effect last December, the lease runs eight and a half years.

The deal in many respects has become symbolic of the rejuvenation of downtown Oakland as a desirable class A office destination. The class A vacancy rate has dropped to around 7 percent, fueled by heavy leasing from Kaiser but also by new tenants like Ask Jeeves.

“Ask Jeeves has national and international prominence, and because of that people would view Oakland in a more favorable light,” said Larry Westland, senior vice president at TRI Commercial in Oakland.

BART access was likely a major factor for a company with as many young workers as Ask Jeeves.

“The bulk of the worker bees are younger, and the younger workers live in the city,” Westland said.

Ryan Tate covers East Bay real estate for the San Francisco Business Times.