The East Bay’s office and housing markets are moving in opposite directions these days, and a real estate shift by the local transit authority highlights the state of the contrasting sectors.
BART, California Bay Area’s transit system, switched plans from an office project to residential at the Contra Costa station in Pleasant Hill. The board of directors voted to change course and now believes “that residential use is most viable,” according to a staff report.
Emeryville-based Harvest Properties was the developer of the previous 12-story, 300,000-square-foot office project, however it is unclear if it will be involved moving forward after it was not able to put forward a feasible project and missed deadlines, according to the report.
BART and Harvest Properties did not respond to requests for comment.
The transit authority has planned office and housing projects throughout the Bay Area going back 20 years. Current plans call for 8,100 units of housing and 1.6 million square feet of office at 20 stations throughout the region. To date, 4,200 units and 679,000 square feet of office have been built.
Cities across the United States are looking to boost housing near transit hubs. And like many of the larger markets around the country, the East Bay, which includes cities such as Oakland and Berkeley, has seen vacancies grow in office buildings.
The office availability rate has risen 10 percentage points to 18% since 2019 as tech, professional services and life science companies have all given back large blocks of new space. Much of the inventory in the East Bay is older and developers have been slow to bring more sought-after modern buildings to the market. The inventory has increased by just 4% in the past 10 years.
“Construction and financing remain expensive, putting additional pressure on developers looking to bring more office inventory to market,” said William Austin, director of market analytics at CoStar Group.
The East Bay’s housing market remains strong with nearly 200,000 units reaching 93% occupancy. The region's relatively more affordable housing has led the Bay Area in population growth, compared to its cross-bay rivals of San Francisco and San Jose. More suburban areas such as Pleasant Hill have not seen as much construction as their urban counterparts and have greater demand for housing, especially near transit.
“Developers have looked to capitalize on transit options for those seeking to locate away from the more urban job hubs around Oakland, San Jose, or San Francisco,” said John Gillem, director of market analytics at CoStar Group. “The strategy has worked well. Collectively, these newer communities near transit could reach stabilized occupancy levels of 95% or more by the end of 2024 and rents are a 40% premium to the East Bay market average.”