Why downtown Oakland is booming

For the first time in more than a decade, the Oakland skyline has a new office tower – and many more to come.

Last month, California health insurer Blue Shield began moving 1,200 workers to 601 City Center, a 24-story building a few blocks west of the 12th Street / Oakland City Center BART station.

The new high-rise offers breathtaking views of downtown Oakland, the Bay Bridge, and the nonprofit’s old home, San Francisco, where it was headquartered for 80 years.

Blue Shield’s Cross-Bay move will result in significant rent and tax savings, said Sandra Clarke, the company’s chief financial officer. Two thirds of the employees already live in the East Bay and now commute better.

“San Francisco real estate is very expensive. We want to use our (health) members’ money as much as possible, ”she said. “The options that Oakland offers especially in this downtown area are worth serious consideration. I know we are very happy that we made this decision. “

The new building has more light and air than Blue Shield’s previous offices at 50 Beale St., a 1967 building now dwarfed by newer towers next door that are occupied by Salesforce. The Oakland Tower also has floor-to-ceiling windows, a fitness room, and a rooftop terrace.

A wave of migrants from San Francisco and local business growth have made Oakland one of the hottest local economies in the country. Further office projects with a total area of ​​more than 4 million square meters or space for a further 20,000 employees are under construction or are planned in the city center, where around 80,000 jobs are currently employed.

More than a dozen large housing projects are also underway. In combination with easy access to BART and the proximity to new restaurants and bars, the city center is experiencing the biggest construction boom in decades, according to experts.

“The skyline is being completely redefined,” said Chris Roeder, real estate agent at JLL. “The perception of Oakland has changed.”

Many of the new projects already have full tenant obligations. Kaiser Permanente plans to build a $ 900 million headquarters that will be the largest office building in Oakland. BART plans to purchase a refurbished lot at 2150 Webster Street for new headquarters. One of its neighbors will be the Sierra Club, which moved to Oakland in 2016 after 124 years in San Francisco to save on rent. San Francisco tech firms Square and Credit Karma have also signed major office expansions in Oakland.

The new Blue Shield headquarters in Oakland on October 21, 2019 in Oakland, California.The new Blue Shield headquarters in Oakland on October 21, 2019 in Oakland, California.Kate Munsch / Chronicle Special

Morten Jensen, president of the JRDV architectural firm in Oakland, is increasingly seeing a “dual core” of major employment and residential centers in San Francisco and Oakland, connected by a 15-minute BART ride.

“I think we are right at the tip of the iceberg as to what the potential of what can happen,” he said.

Jensen views affordable housing as a daunting problem, but since BART is the lifeblood of local economic growth, he also wants regional executives to prioritize transit expansion.

“It is time for Oakland to take on a bigger role in the Bay Area. Transport is really the key, ”said Jensen. “It’s not just Oakland in itself. It is Oakland that is connected to the entire region. “

Officials are investigating both a second Transbay BART tube and a second bridge across the bay, but there are disagreements over priorities.

Oakland thinks bigger. Since 2015 the city has been working on an inner city plan that will guide growth over the next 20 years. The plan was restarted in 2017 to focus more on equity and benefit for existing residents, especially marginalized color communities.

A draft plan provides for 61,000 new jobs and almost 30,000 new apartments in the city center by 2040, up to a quarter of which are affordable. The city could introduce fees and need more affordable housing to meet these goals. Less than 7% of the 9,304 homes being built across the city are affordable, despite marketable housing fees being charged in 2016.

Downtown growth has been a long time coming. In 1999, then Mayor Jerry Brown had a plan to bring 10,000 new residents to the area. However, the 2008 recession was devastating, freezing almost all construction in Oakland until around 2015 as rising rents pushed both San Francisco residents and businesses east.

An artist rendering of the new planned Oakland Towers.An artist rendering of the new planned Oakland Towers.TMG Partners / Steelblue /

San Francisco developer Shorenstein Properties began construction on the Blue Shield building in the fall of 2008, but stopped work shortly after the recession began. The company had already bought the steel and stored it in Arizona for nearly a decade.

Tom McDonnell, Shorenstein’s vice president of leasing, sees parallels between the transformation of Oakland and another area that has seen big changes: San Francisco’s mid-market, where Shorenstein bought and renovated today’s Twitter headquarters.

Access to transit and new housing in both areas helped attract new businesses. “When you put such a strong residential component in a business park, it changes the atmosphere of the whole city,” said McDonnell. “There are so many good things.”

One thing Oakland doesn’t have is a huge tech sector. According to a city report, in the second quarter of 2016 only 3,500 of 65,000 downtown jobs, or about 5%, were tech. Uber bought the former Sears department store building in 2015 and was planning a new main office. But two years later, in the midst of countless corporate scandals, it sold the building. Square rented it for an expansion office and plans to move next year.

San Francisco is getting more and more expensive and finding space is getting harder and harder. Therefore, the likelihood of a major technical foray into Oakland increases, said JD Lumpkin, broker at Cushman & Wakefield.

Rising fees for office projects in San Francisco and growth restrictions continue to drive rents higher. “It will only increase in the years to come. I think this will only be a positive thing for Oakland, ”said Lumpkin.

Developers are preparing to attract big technologies. TMG Partners plans to begin construction on an 875,000-square-foot project called Telegraph Tower that has no tenants next year. The project’s 15-foot floor height and three roof decks make it competitive with San Francisco’s new towers, said Lumpkin, who is co-marketing the property with JLL’s Roeder.

Matt Field, president of TMG Partners, said Oakland has benefited from national shifts toward urban living, and ongoing transit and housing challenges have made East Bay growth more attractive than ever.

“Companies are really trying to get closer to their employees,” he said.

Roland Li is a contributor to the San Francisco Chronicle. Email: [email protected] Twitter: @rolandlisf

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