Research 4Q 2019 Greater Oakland Office Market

RESEARCH 4Q 2019 GREATER OAKLAND OFFICE MARKET

OAKLAND ASKING RATES SURGE MARKET ANALYSIS

WITH NO CEILING IN SIGHT Asking Rent & Availability The Oakland office market remained robust through the fourth quarter of 2019, as leasing activity held steady and asking rates reached $4.75 17.0% record highs. Rent growth was boosted by new Class A space and $4.15 15.0% creative Class B space in Downtown Oakland. As the fourth quarter $3.55 13.0% drew to a close, Class A asking rates in Downtown Oakland were up $2.95 11.0% 19.0% from the previous year, from $4.78/SF to $5.62/SF. This is nearly double the asking rate of $2.80/SF recorded in 2014. Overall, the $2.35 9.0% East Bay market has seen a gradual increase in cost, but Oakland, at its $1.75 7.0% center, is still leading the way. The current pricing, while still rising, is 4Q14 4Q15 4Q16 4Q17 4Q18 4Q19 still ideal for San Francisco tenants looking to cut their expenses Average Asking Rent ($/SF) Vacancy (%) drastically by making a short trip over the Bay Bridge. Net Absorption (Square Feet, Thousands)

AVAILABILITY TRENDS 500 Availability in the Greater Oakland market has been settling into a new 300 normal of around 10%, although there was a slight spike when 601 City Center hit the market in the fourth quarter of 2019. The subleasing of 100 large and small blocks of space has become more attractive, resulting -100 in a slight decline in the total amount of sublease space available. -300 OAKLAND LARGE BLOCKS -500 In recent years, there has been a push to open up many of the divided 4Q14 4Q15 4Q16 4Q17 4Q18 4Q19 floors in Downtown Oakland divided floors of office space to full floor Construction & Deliveries (Square Feet, Millions) availabilities. 1.5 The rapid, quarter-over-quarter increase in asking rates has been making it increasingly difficult for smaller local tenants to renew their 1.0 current leases. Opening the space up for a larger and well-financed organization would be optimum for local ownership because of deal 0.5 length and current pricing negotiations. 0.0 One of the largest blocks hitting the market starting in August 2021 2014 2015 2016 2017 2018 2019 2020 through February 2024 is 300 Lakeside Drive. Three of Oakland’s Deliveries Under Construction Projected largest employers, Kaiser, BART and the University of California Office MARKET SUMMARY of the President, will relocate to newly constructed or renovated office Current Prior Year Ago 12 Month buildings in Downtown Oakland, leaving behind nearly 600,000 square Quarter Quarter Period Forecast feet and 22 floors of office space. This will overtake Blue Shield’s new Total Inventory 28.7M 28.0M 27.7M  headquarters at 601 City Center to become the largest block of availability in the East Bay market, which currently has 305,0000 square Total Availability Rate 11.1% 10.2% 9.6%  feet of availability. Clorox is giving back the top two floors and half of Quarterly Net Absorption 51K SF 23K SF 450K SF  another at 1221 Broadway this quarter, adding 57,425 square feet. Total FS Asking Rent $4.39/SF $4.06/SF $3.84/SF 

Under Construction 378K SF 975K SF 1.2M SF 

Deliveries 597K SF 0 SF 0 SF 

SIGNIFICANT LEASE TRANSACTIONS INVESTMENT TRANSACTIONS Several noteworthy lease transactions were signed in the fourth The most significant investment sale of the final quarter of 2019 quarter, further strengthening the Greater Oakland market. In the occurred at 2150 Webster Street in Downtown Oakland. The 244,287- largest lease of the quarter, music streaming platform Pandora, which square-foot office building sold for $140 million, or $573/SF. The is headquartered in Oakland, renewed its lease for 123,534 square feet property was purchased by BART, following through on its plans to not at 2101 Webster Street in the Lake Merritt submarket. The next two renew its current lease at 300 Lakeside Drive. The other significant largest leases of the quarter both took place at 1999 Harrison in purchase of the quarter took place in Emeryville at 1400 65th Street, Downtown Oakland. Simpson Gumpertz & Heger, a national engineering also known as the EmeryTech Centre. Blackstone purchased the firm, leased 20,776 square feet, and Meyers Nave, a Bay Area law firm, property from Clarion Partners for $126.5 million, or $555/SF. leased 20,542 square feet.

NET ABSORPTION BY CITY DIRECT VS. SUBLEASE AVAILABILITY

Square Feet, Thousands Square Feet, Millions

500 3.8

300 3.0

100 2.3

-100 1.5

-300 0.8

-500 0.0 2015 2016 2017 2018 2019 4Q15 2Q16 4Q16 2Q17 4Q17 2Q18 4Q18 2Q19 4Q19 Alameda Berkeley Emeryville Oakland Richmond Sublease Availability Direct Availability

SELECT LEASE / OWNER-USER TRANSACTIONS

Tenant Building(s) Submarket Type Square Feet

Pandora Media 2101 Webster Street Oakland (Lake Merritt) Renewal 124,534

Simpson Gumpertz & Heger 1999 Harrison Street Oakland (Lake Merritt) Direct Lease 20,776

Meyers Nave 1999 Harrison Street Oakland (Lake Merritt) Direct Lease 20,542

DEEM 1330 Broadway Oakland (City Center) Direct Lease 16,545

Launch Darkly 1999 Harrison Street Oakland (Lake Merritt) Expansion 13,166

Eko Devices 1212 Broadway Oakland (City Center) Sublease 11,704

ELS Architect 2030 Addison Street Berkeley Renewal 10,236 SELECT SALE TRANSACTIONS

Building(s) Submarket Reported Sale Price Reported $/RSF Square Feet

2150 Webster Street Oakland (Lake Merritt) $139,978,000 $573 244,287

1400 65th Street Emeryville $126,500,000 $555 228,110

140-160 Franklin Street Oakland (Jack London Square) $17,000,000 $395 43,033

OVERALL SUBMARKET STATISTICS

Total Under Total Total Qtr Gross Qtr Net YTD Net Total FS Inventory Construction Availability Availability Absorption Absorption Absorption Asking Rent (RSF) (SF) (SF) Rate (RSF) (RSF) (RSF) (Price/SF)

Alameda 3,560,046 0 464,763 13.05% 17,126 -23,100 -82,960 $3.04

Harbor Bay 1,921,071 0 161,559 8.41% 8,064 4,770 -45,362 $278

Marina Village 1,638,975 0 303,204 18.50% 9,062 -27,870 -37,598 $3.51

Berkeley 3,407,669 42,000 142,365 4.18% 33,486 21,879 -27,927 $3.40

Emeryville 4,530,173 0 473,591 10.45% 20,869 -14,738 113,528 $3.74

Oakland 14,803,424 336,400 1,790,885 12.10% 366,263 65,100 -104,858 $5.03

Airport 2,127,895 0 121,776 5.72% 15,004 8,880 -23,575 $2.14

Jack London Square 1,413,046 0 98,353 6.96% 14,394 6,640 40,294 $3.27

Lake Merritt 5,552,266 0 717,197 12.92% 251,863 58,564 -30,045 $5.19

City Center 5,710,217 336,400 853,559 14.95% 85,002 -8984 -90,350 $5.52

Richmond 2,411,525 0 307,759 12.76% 2,338 1,404 -627 $2.31

GREATER OAKLAND 28,712,837 378,400 3,179,363 11.07% 440,082 50,545 -76,204 $4.39

SELECT CLASS A SUBMARKET STATISTICS

Emeryville 2,782,066 0 225,278 8.10% 20,869 -17,507 61,053 $4.53

Downtown Oakland 8,077,019 336,400 1,145,439 14.18% 268,128 34,254 -90,188 $5.62

Lake Merritt 4,146,173 0 530,228 12.79% 231,892 54,464 9,880 $5.46

City Center 3,930,846 336,400 615,211 15.65% 36,236 -20,210 -100,068 $5.75

GREATER OAKLAND 16,361,365 378,400 1,917,006 11.72% 329,932 1,765 -116,934 $4.94

SELECT CLASS B SUBMARKET STATISTICS

Emeryville 1,748,107 0 248,313 14.20% 0 2,769 37,377 $2.99

Downtown Oakland 3,185,464 0 425,317 13.35% 68,737 15,326 24,823 $4.76

Lake Merritt 1,406,093 0 186,969 13.30% 19,971 4,100 23,639 $4.54

City Center 1,779,371 0 238,348 13.40% 48,766 11,226 1,184 $4.96

GREATER OAKLAND 12,351,472 0 1,262,303 10.37% 110,150 48,780 40,730 $3.57

HISTORICAL GROSS ABSORPTION

1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19

Alameda 24,341 106,821 44,543 15,099 23,759 4,992 141,617 17,126

Berkeley 119,380 35,491 87,877 40,235 16,173 45,171 6,168 33,486

Emeryville 78,937 64,650 170,510 192,234 95,662 75,904 120,785 20,869

Oakland 272,217 220,317 330,659 611,166 232,380 302,956 254,228 366,263

Richmond 19,467 0 10,951 2,952 6,463 0 2,775 2,338

GREATER OAKLAND 514,342 427,279 644,540 861,686 374,437 429,023 525,573 440,082 HISTORICAL NET ABSORPTION

1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19

Alameda -119,081 5,218 2,208 -8,693 -36,850 -59,150 13,040 -23,100

Berkeley 100,421 -46,206 11,252 24,052 -9,101 27,000 -18,826 21,879

Emeryville -58,953 -85,674 -228,207 126,011 36,680 46,371 30,117 -14,738

Oakland -8,950 -101,001 -274,932 315,120 -48,413 -55,569 -876 65,100

Richmond 12,726 -121,404 1,404 -1,404 -627 0 0 1,404

GREATER OAKLAND -73,837 -349,067 -488,275 455,086 -58,311 -41,348 23,455 50,545 HISTORICAL AVAILABILITY RATE

1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19

Alameda 10.98% 10.44% 10.18% 10.43% 11.51% 13.23% 12.41% 13.05%

Berkeley 5.03% 5.92% 5.50% 4.79% 5.06% 4.27% 4.82% 4.18%

Emeryville 11.25% 13.20% 17.47% 14.59% 13.78% 10.79% 10.13% 10.45%

Oakland 8.12% 8.81% 10.80% 8.54% 8.88% 10.75% 10.75% 12.10%

Richmond 8.40% 11.53% 11.47% 11.53% 11.56% 11.56% 11.56% 12.76%

GREATER OAKLAND 8.66% 9.58% 11.21% 9.56% 9.77% 10.34% 10.21% 11.07% HISTORICAL ASKING RENT

1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19

Alameda $2.48 $2.50 $2.54 $2.53 $2.54 $2.71 $2.72 $3.04

Berkeley $3.34 $3.82 $3.40 $3.54 $3.59 $3.25 $3.30 $3.40

Emeryville $3.45 $3.53 $4.05 $3.89 $3.87 $3.65 $3.70 $3.74

Oakland $4.25 $4.29 $4.22 $4.24 $4.30 $4.63 $4.62 $5.03

Richmond $2.26 $2.37 $2.37 $2.37 $2.37 $2.37 $2.37 $2.31

GREATER OAKLAND $3.66 $3.79 $3.89 $3.84 $3.87 $4.06 $4.06 $4.39

NEWMARK KNIGHT FRANK KYLE PHILLIPS JACOB MOLLOY 1111 Broadway, Suite 100 Research Analyst Research Analyst Oakland, CA 94607 510.496.5756 510.300.0219 510.923.6200 [email protected] [email protected] Corporate CA RE #: 00832933

Newmark Knight Frank has implemented a proprietary database and our tracking methodology has been revised. With this expansion and refinement in our data, there may be adjustments in historical statistics including availability, asking rents, absorption and effective rents. Newmark Knight Frank Research Reports are available at www.ngkf.com/research

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