Back in 2015, Oakland was booming. Technology workers streamed in from across the bay in search of cheaper rent. Uber announced it was moving its headquarters from San Francisco into the sprawling old Sears building downtown, setting off a string of investments in the Bay Area’s second city.
A couple years later, the rideshare giant changed its mind and sold the building. Oakland's real estate market gradually went from hot to cold, especially after the pandemic spurred a mass shift to remote work and tenants downsized.
Now a decade later, a handful of investors are convinced that Oakland will soon boom again, even as the Bay Area’s second city continues to struggle with problems ranging from rising crime to a cash-strapped city government. Local Bay Area buyers — stepping in to nab properties that have attracted little-to-no interest from larger institutional investors — have gotten breathtaking deals on office buildings that traded hands for far more money just a few years ago in some cases.
In one recent deal, locally based Frontline Realty Capital snapped up a distressed 10-story office building at 1440 Broadway in downtown Oakland for just over $5 million — down from its $43.5 million price tag back in 2018. In 2023, the approximately 90,000-square-foot property was handed back to its lender in a foreclosure that typified the Bay Area’s persistently bleak post-pandemic office market.
Frontline explained in a statement that the purchase was part of its strategy of acquiring “well-located assets with significant potential to create value through thoughtful repositioning and patience.”
A director with the firm, Christian Diggs, said he had his eye on the early 20th century Beaux Arts building for a decade or more, and that the firm remains “very optimistic about Oakland’s long-term outlook.”
The city's fortunes remain tied to San Francisco, one of the nation's most distressed office markets, where observers have recently predicted that better times are just around the corner. Those hopes were boosted by a handful of large leases signed in the final months of 2024, according to CoStar.
Total leasing volume in the fourth quarter of 2024 topped 3.5 million square feet in the Bay Area, the second-highest quarterly amount since the onset of the COVID-19 pandemic in 2020 and the highest since the third quarter of 2021.
Signs of life?
Oakland, on the other hand, has yet to show significant signs that it's recovering from the impacts of the pandemic. Absorption, or the net change in occupancy measured by the amount of space occupied versus vacated, fell to its lowest level in 2023 in about 25 years, according to CoStar data, with tenants collectively handing back upward of 940,000 square feet more than they leased.
“There are no signs yet of a material increase in demand, and the outlook is for higher vacancy and, at best, flat rent growth in the coming quarters,” said CoStar.
Last week, the city laid off nearly 100 city workers in an effort to balance a $130 million budget shortfall, adding to cuts that have already curtailed spending on police overtime and arts and culture organizations. As in San Francisco, the budget crisis in Oakland is closely linked to dwindling transfer tax revenues on commercial real estate sales.
But in recent months, the city is starting to see a surge in deals.
In late 2024, a distressed 15-story office tower at 180 Grand Ave. in Oakland that had changed hands for $175 million back in 2019 sold to San Francisco-based Lakeside Group and Rubicon Point Partners for around $30 million.
Around the same time, Kaiser Permanente, one of Oakland’s largest employers, sold 1950 Franklin St., a mostly vacant 21-story box overlooking Lake Merritt that once housed the healthcare giant’s executive team, to the Behring Companies, an East Bay developer, along with a neighboring parking garage for about $14.4 million, about $32 a square foot.
Live, work, play
Behring is also the owner of 1900 Broadway, a newly constructed 39-story luxury apartment tower that also incorporates office and coworking spaces and about 47,000 square feet of high-end amenities that includes a dedicated fleet of Teslas.
“Oakland has all the fantastic elements that it always had,” the firm’s head, Colin Behring, told CoStar News.
Behring has quietly bought up some two blocks of real estate just steps from public transit — around a 15-minute ride to downtown San Francisco or the University of California at Berkeley campus — as well as the Paramount and Fox theaters, along with numerous restaurants and shops near Lake Merritt, a popular spot for runners and picnickers.
Diggs said his firm is seeing strong leasing interest for 1440 Broadway, which has as tenants a variety of nonprofit groups as well local pride apparel store Oaklandish and Gus’s World Famous Fried Chicken. The building, founded by an early 20th century industrial tycoon, features Renaissance and Baroque architecture with domed ceilings, oak fixtures and marble interiors.
Frontline plans to acquire several other properties in Oakland and San Francisco in the coming months.
“People are going to be back in the saddle very soon,” he told CoStar News. “We feel very strongly about that.”