Quarterly Report 1Q 2007 - Click Here to Download Full PDF 

Urban residential construction has led the way in new development over the past two years. Condominium projects have sprouted out of the ground from Berkeley to Oakland. As the housing demand dramatically dropped in recent months, the result has been a slow down of residential development and scarcity of new projects. Despite this trend, commercial development is picking-up pace with two monumental projects quickly taking shape in Oakland and Emeryville.

Class A office rents are exceeding $33 per square foot on an annual basis and vacancy has dropped below nine percent in Oakland. This movement in the market has allowed Brandywine Realty Trust to premier its 250,000 square foot nine story office project in the Lake Merritt market. This is the first new commercial office development since Shorenstein Realty Service built 555 12th Street in City Center over five years ago. Brandywine has committed to Center Twenty One at 2100 Franklin with no anchor tenant and will be relying on the strong leasing market as well as some of their larger, established tenants to fill this new office space. The combination of Center Twenty One with the existing 2101 Webster facility, along with its upgraded two story glass lobby & atrium with over forty thousand square feet of on-site retail, should make this one of the premier buildings in the downtown Oakland market. This facility will be a LEED certified “Green Building” incorporating natural light, efficient heating and cooling systems as well as using sustainable construction methods. Occupancy is due for the second quarter of 2007.

Another major project coming out of the ground is Wareham’s EmeryStation East. Wareham Development is close to completion on its 245,000 square foot, life science facility located at the corner of Hollis and Powell Streets in Emeryville. This facility will cater to the laboratory and research tenants in the East Bay. Floor plates range up to sixty-four thousand square feet, which will afford maximum flexibility for large and small tenants. In typical Wareham fashion, EmeryStation East will offer a twenty thousand square foot landscaped plaza, ample structured parking as well as outdoor terraces and balconies. This building, like Center Twenty One, is being built “on spec”, with no anchor tenant firmly secured.

In the process and design phase, not too far behind, are two other significant projects. SKS Development has purchased an entitled office site on the corner of Broadway and 11th Streets, adjacent to the University of California Office of the President building. This office tower is rumored to be in the design and approval phase to deliver at minimum two hundred and twenty five thousand square feet of office space in the City Center market. Additionally, Shorenstein Properties is rumored to begin another office project at City Center. If they move forward in 2007, this potential project will add another 510,000 square feet of space to the office market.

With close to half a million square feet of new office and biotechnology space being added to the East Bay market, the next two years should offer office tenants and life science tenants, the opportunity to grow into new Class A state-of-the-art facilities. Because of high construction costs, the rent expectation in these facilities is significantly above existing rents. This has created a big gap between the asking and actual receiving rents for these projects.