SAN RAMON, CA—After the recent absorption of several San Francisco-based tenants, the Oakland, CA market joins the other supply-constrained markets of San Francisco, the Peninsula and Silicon Valley with rapidly escalating rental rates and few large block availabilities. As of now, there are no 200,000-square-foot blocks of available space in downtown Oakland and San Francisco will not deliver any 200,000-square-foot blocks until mid-2017.

In San Francisco, the class-A vacancy rate is 4.5% with an average asking rental rate of $5.81-per-square-foot-per-month, fully serviced. The third quarter ended with tenant demand at 6.3 million square feet with as many tenants having requirements greater than 50,000 square feet. The downtown Oakland market closed the third quarter with a class-A vacancy rate of 6.91% and an average asking rental rate of $3.47-per-square-foot-per-month fully serviced, and up to $4.00-per-square-foot-per-month fully serviced for prime vacant space, according to Newmark Cornish & Carey.

"UBERS's market-moving purchase of the Sears building in September highlighted the recent flight to the downtown Oakland market and now the I-680 Corridor markets are poised to absorb the migration," said Tom Fehr, a Newmark executive vice president and regional manager.

The I-680 Corridor lies to the east of Oakland and encompasses northern cities of Concord, Pleasant Hill and Walnut Creek as well as the Tri-Valley, CA cities of Danville, San Ramon, Dublin and Pleasanton. (Livermore is also a city in the Tri Valley but is located on Interstate 580.)

"In past cycles, as San Francisco became supply-constrained and tenants realized the burden of steeply escalating rental rates, companies sought less expensive, comparable space in the East Bay," says Fehr.  

The North I-680 Corridor market third quarter class-A vacancy rate was 16%, with asking rental rates ranging from $1.90 to $4.00-per-square-foot-per-month, fully serviced. Some submarkets there, such as Shadelands in Walnut Creek, have a 33% vacancy rate. The Tri-Valley market closed the third quarter with a class-A vacancy rate of 18.66% and an average asking rental rate of $2.75-per-square-foot-per-month, fully serviced, according to Newmark.

Jeffrey Weil, CCIM, MCRE, SIOR, executive vice president, Colliers International, tells GlobeSt.com: "There is 3 million square feet of class-A office space currently vacant along the I-680 Corridor and Tri-Valley regions. A number of the projects offer amenities like free common conference and exercise facilities, free parking and a number of office projects are BART-located. Activity is brisk at several sub-regions with prospects from Oakland and San Francisco taking advantage of the rent differentials."

The large block availabilities exceeding 75,000 square feet located along the I-680 Corridor include several large business parks. In Concord's Swift Plaza, there is a full building opportunity consisting of approximately 185,000 square feet at 1755 Grant St. and at 1655 Grant St., there is approximately 98,000 square feet for lease. In Pleasanton, CA at Rosewood Commons, Swift Real Estate Partners' 1 million-square-foot campus has large block availabilities in two of its five buildings, while in Safeway's former corporate headquarters, Centerpointe at 5918 Stoneridge Mall Rd., the 201,000-square-foot-building is currently available for lease. In Sycamore Plaza, 83,000 square feet of space at 6701 Koll Center Parkway in Bernal Corporate Park's 99-acre, 1.2-million-square-foot master-planned business park, is for lease.

In the largest space available, in San Ramon at Bishop Ranch, Sunset Development Company, the owner of the 8 million-square-foot business park, is nearing completion of major upgrades at 2600 Camino Ramon, the 1.86 million-square-foot building with occupancy opportunities of approximately 750,000 square feet. The former Pacific Bell/AT&T building originally was occupied in 1983 by Pacific Bell, which subsequently moved its headquarters out of San Francisco to the suburbs in the mid-1980s. After AT&T bought Pacific Bell, the complex eventually became the West Coast headquarters for AT&T until it was sold last year to MetLife in a joint venture with Sunset. The acquisition of the 100-acre campus has resulted in the addition of office space, two lakes, a market and a conference center to the list of Bishop Ranch amenities. AT&T retained not quite half of the office building in a lease and the other portion is available for lease in the campus now known as 2600.

Sunset Development also plans to develop City Center, a 500,000-square-foot shopping and entertainment development with 500 housing units across the street from 2600. The plan is to transform the development into a seven-day-a week destination, in an appeal to workers seeking live/work/play options.  

Alex Mehran Jr., president and COO, Sunset Development Company, tells Globest.com: "There's no denying the strengths of the I-680 Corridor. They are evident through the high level and quality of schools, relative home affordability and the overall quality of life that being in this region of the East Bay has to offer."

SAP recently took 150,000 square feet at 2600 and is expected to begin moving in during early 2017. In the move to Bishop Ranch, SAP will exit offices it now occupies in Pleasanton and Dublin. At the East Bay Centerlocated at One Sybase Drive in Dublin, there are two 203,000-square-foot buildings available for lease after SAP vacates the campus.