With values soaring, owners hope to flip these office buildings in the heart of Oakland
Three Class A office buildings in Oakland are up for sale amid the city’s strong office market and rising rents.
Westcore Properties is selling 1221 Broadway, known as the Clorox Building, which recently completed two of the year’s largest Oakland leases. Separately, Strada Investment Group is marketing the nearby 1300 Clay St. and 505 14th St. The three properties are all part of the City Center complex that is adjacent to the 12th Street BART station and total nearly 900,000 square feet.
Bill Nork, managing director of brokerage Newmark Cornish & Carey, who isn’t involved in any of the properties, said that the timing of the sales likely reflects a desire to take advantage of the strength of the office market. The vacancy rate in Oakland’s commercial core is under 8 percent, and rents have risen to the high-$40s per square foot in some Class A properties, according to local brokers.
“The market’s done well. Rents have gone up,” said Nork. “Spaces are getting leased up. There just aren’t a whole lot of big spaces in Emeryville or Oakland right now.”
An Eastdil Secured team led by Jeffrey Weber, Stephen Van Dusen and Mark Penrod is marketing 1221 Broadway. Weber of Eastdil Secured, a unit of Wells Fargo, didn’t return requests for comment. Victoria Grether, vice president of San Diego-based Westcore, confirmed 1221 Broadway was for sale but declined to comment further. Sam Swan of JLL, the building’s leasing broker, declined to comment.
The 521,177-square-foot tower is adjacent to the 12th Street BART station and is 91 percent leased, according to the offering. The building has an average remaining lease term of 10.2 years.
The sales pitch also goes beyond economics. The brokers appear to be selling investors not just on the building, but on Oakland itself. The offering highlights the building’s proximity to the City Center retail center and the Uptown neighborhood, “which features a host of cultural and entertainment destinationsas well as a growing influx of dynamic new restaurant and nightlife concepts.”
“With a growing influx of affluent young residents, proliferation of upscale infill residential and adaptive reuse development, and an increasingly nationally recognized culinary and artistic movement, Oakland is rapidly transitioning into one of the San Francisco Bay Area’s most dynamic and popular [cities],” said the offering.
The building recently completed two major leases: Medical company Brown & Toland leased 60,000 square feet in one of the largest Oakland transactions this year and another example of a San Francisco company moving to the East Bay. Renewable Funding also recently took 20,000 square feet.
Westcore bought the building for $110 million, or $225 per square foot, in 2012 from Clorox, the giant manufacturer of cleaning supplies founded in the East Bay in 1913. Clorox still has its corporate headquarters in the building. Westcore also renovated the building and added environmental features to gain LEED Platinum certification in 2014.
Only a few Oakland office properties have traded hands in the past year, but they provide a rough estimate for 1221 Broadway’s valuation. In April, the California Nurses Association bought 155 Grand Ave. for $65 million from Brandywine Realty Trust. The 204,000-square-foot building was sold for about $318 per square foot. Last November, the University of California paid $215 million, or $380 per square foot, for 1111 Broadway, according to the Registry.
If 1221 Broadway was sold for around $380 per square foot, it would sell for around $200 million, or $90 million more than what Westcore paid in 2013. It isn’t clear if Westcore currently has an asking price.
Separately, Strada is marketing 1300 Clay St., which is 195,000 square feet, and 505 14th St., which is 172,000 square feet. The developer is likely working with HFF to market the properties and no asking price has been set, said Strada principal Michael Cohen. Strada bought the two properties in 2013 from CBRE Investors.
Although Strada is looking to sell the buildings, it is also continuing to invest in downtown Oakland. The developer is planning to build a 262-unit residential building at nearby 1100 Clay St. The Oakland Planning Commission approved the project in July, and the City Council is scheduled to vote on the sale of the public site to Strada at next Tuesday’s meeting, with a final vote on Sept. 22.
