OAKLAND — Global and local investors are paying rising prices for trophy buildings in downtown Oakland, including the latest deal for the iconic Uptown Station building, a sign of investor confidence in the East Bay’s largest city.
In less than two years, foreign and local buyers have plunked down more than $1 billion to buy three well-known office buildings in downtown Oakland, with the most recent deal being completed when a mega-investor from Asia bought Uptown Station.
Uptown Station was bought for $419 million — in cash — by an affiliate controlled by Singapore-based Mapletree Investments, a big-time real estate investment firm with a global reach, according to public documents filed on March 5 with Alameda County officials.
All of this points to a robust office market in downtown Oakland, in the view of commercial property experts such as Steve Golubchik, vice chairman and head of capital markets with Newmark, a commercial real estate firm; and Edward Del Beccaro, an executive vice president with TRI Commercial/CORFAC International, a commercial real estate firm.
“This deal validates the Oakland market,” said Golubchik, a vice chairman and head of capital markets with Newmark, referring to the Uptown Station purchase. “This shows how strong the interest is in the Oakland market.”
Yet at the same time, the investment enthusiasm for Oakland isn’t evenly spread out, Del Beccaro said. Del Beccaro suggested that the interest is primarily focused on the up-and-coming downtown rather than other sections of Oakland that might face challenges such as crime or homelessness.
“Oakland is like a tale of two cities,” Del Beccaro said. “The primary attention is going to the Uptown and Lake Merritt areas” of downtown Oakland.
Tenants also are intrigued by Oakland and several have defected from San Francisco or decided to expand in the East Bay city rather than in its larger neighbor on the west side of the Bay Bridge.
PG&E intends to move its headquarters and thousands of workers out of San Francisco and establish its head offices in a tower perched on the shores of Lake Merritt that TMG Partners bought in 2020, one of the three big deals that contributed to the billion-dollar shopping spree for Oakland office centers.
Credit Karma, a dynamic tech firm that specializes in financial services, revealed in late 2020 that it will move its headquarters from San Francisco to The Key at 12th, a new office complex being constructed in downtown Oakland.
Square in 2018 leased all of the office space in Uptown Station in a deal that will bring downtown Oakland hundreds of tech workers.
The shift has occurred even though, in Del Beccaro’s view, both Oakland and San Francisco have anti-business city administrators and policymakers.
“San Francisco is having all sorts of issues, and Oakland is the beneficiary,” Del Beccaro said. “Companies are migrating from west to east.”
This trend, in turn, has prompted investors to grab office buildings in downtown Oakland in mega-transactions, starting in mid-2019.
Investors have spent slightly more than $1.04 billion in three major downtown Oakland property purchases:
— In July 2019, an affiliate of France-based AXA Investment Managers – Real Assets paid $175 million for a 15-story office tower at 180 Grand Ave., a building that totals 279,000 square feet. That worked out to $627 a square foot.
— In October 2020, San Francisco-based TMG Partners paid $449.8 million for a complex that includes a 28-story office tower at 300 Lakeside Drive and a smaller office and retail building next door at 344 Thomas L. Berkeley Way. The complex totals 954,000 square feet, including the office tower of 824,500 square-feet that is leased to PG&E and the adjacent building of 130,000 square feet building, along with a parking garage. The price worked out to $471 a square foot.
— In March, the $419 million Uptown Station deal produced a price of $1,055 a square foot for the eight-story building, which totals 397,000 square feet, consisting of 362,000 square feet of offices and 35,000 square feet of retail.
“That’s the highest price per square foot ever paid for a building in the East Bay,” Golubchik said.
Newmark brokers Golubchik, Jonathan Schaefler, and Darren Hollak arranged the recent Uptown Station transaction.
Del Beccaro believes the buying binge will continue, not only in the East Bay due to the exodus from San Francisco, but also in tech hubs such as Silicon Valley.
“Money is looking for choice assets,” Del Beccaro said. “Investors are raising hundreds of billions of dollars to buy commercial real estate.”
