Quarterly Report - 3Q 2006 - Click Here to Download Full PDF

The I-880 corridor vacancy rate continued to decrease as office rents reached new highs in the third quarter. The Emeryville submarket is positioned for further rent increases with several sizeable companies looking at expansion and two substantial office projects poised to sell.

Emeryville experienced the steepest rise in average rent prices, increasing from $2.35 in the second quarter to $2.65 in the third quarter. Emeryville’s vacancy rate dropped to 8.7% as the result of several large deals. Big Fix expanded from 12,637 square feet to 26,500 square feet while staying within the city. Jamba Juice leased 35,000 square feet at 6475 Christie, relocating its headquarters from San Francisco. MobiTv is rumored to be looking for an additional 25,000 to expand at 6425 Christie.

Equity Office Properties is currently marketing the Watergate Towers buildings for sale. The complex includes 1.14 million square feet of office space. EOP, the largest office landlord in the country, has owned Watergate Towers since 1998. Average starting rates have risen from $1.90 in 2004 to $2.45 in 2006. Underwriting rates for the sale have pushed asking rents north of $2.75, equaling the highest Class A downtown Oakland rates.

In addition, TMG Partners is rumored to be considering a sale of Bay Center in Emeryville, a three building office complex totalling 330,000 square feet. Bay Center is the former Sybase headquarters and is now home to several technology companies as well as Novartis and Jamba Juice.

As the market for office space tightens in Emeryville, tenants looking for expansion space are beginning to plan further into the future. As space options decrease and rents rise, tenants will begin to look at alternative markets to meet their requirements.