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Market Report

Oakland Office Investment Forecast

2022 Outlook

Class B/C Properties Outperform in Wake of Health Crisis;
Investors Optimistic on Mid-Tier Assets

Bifurcated performance in the East Bay. Many of the lower-tier office tenants who take advantage of less-expensive rates in the market have held onto their space through the downturn, keeping conditions relatively tight. Entering this year, vacancy at Class B/C properties was hovering in the mid-12 percent range, compared to 22 percent for Class A buildings. An added challenge for top-tier space comes from the prevalence of available leases across the Bay Bridge. Prior to the downturn, Class A space in the two-county region was leased at a 30 percent discount relative to San Francisco. Now, that gap has narrowed to about 20 percent, heightening competition throughout the Bay Area for the tenants actively seeking high-end office footprints. On a positive note, construction is very light in the East Bay as just a handful of properties will come online this year. Furthermore, nearly all of the space scheduled to be completed in 2022 has leasing commitments. Nonetheless, it will take at least another year to absorb excess Class A space.
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