Sperry Van Ness International Corporation’s (SVNIC) 2015 Market Update Reports assess the current state of the national commercial real estate market, and identify micro-trends within specific geographic regions and industries for 2015. Today we are delving into the 2015 Top Office Markets to Watch. Not the largest or the most actively contested markets, the 2015 Office Markets to Watch are each at an important juncture that presents unique opportunities for investment. Together, they reflect the diversity of trends that is driving the economy and commercial real estate performance in markets across the country.
Top Office Market to Watch: Oakland, CA
Mimicking the dynamics of the Bay Area’s residential markets, Oakland is well-positioned to welcome tenants fleeing from the relentless expansion of tech companies as they further saturate San Francisco’s office landscape. Spillovers from San Francisco to Oakland are not new – they have been a feature of the market ever since the first tech companies decided to move up from Silicon Valley to the urban core of the city – but higher rents and limited space opposite the Bay Bridge have increased Oakland’s appeal. Outside of a few homegrown tech companies like Pandora and Ask.com, and a stream of freshly incubated tech startups, Oakland has yet to land its first big San Francisco tech migrant (as of early 2015). Brokers are reporting that several tech companies have been “kicking the tires” at the Sears Building, which is currently undergoing renovations to transform the former department store into tech-friendly office space. Other tenants, like chocolatier TCHO, advertising agency EVB, and several law firms, have taken advantage of the disparity in rental rates and taken the short BART ride over to Oakland.
For small- and mid-cap investors willing to accept lower liquidity than in San Francisco, Oakland’s higher cap rates and favorable prospects may offer compelling buying opportunities over the next year. Fundamentals are pointing in the right direction as investors keep their fingers crossed for a flurry of activity should big tech companies put their stamp of approval on the East Bay.
To read more on Oakland and other top office markets, download the full version of the 2015 Office Market Update report here.
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