Manhattan, several years ago, was a borough of New York City where residents and companies were priced out due to high rents. So they picked up, and went across the river to Brooklyn. Many currently complain that, in turn, Brooklyn has become too expensive.
San Francisco’s high rents surely haven’t been a secret for some time, and a vast migration to Oakland, across the Bay, has taken place.
Is Oakland the next Brooklyn, where prices will skyrocket as a result as well?
It’s not looking good for those wanting a price break.
The car service and tech firm Uber Technologies bought the former Oakland Sears, giving it 330,000 square feet. And it is reportedly looking for more space.
As creative-office space is bulking up in the area, multifamily is following. Madison Park Financial Corp. is betting big on the Oakland area. The developer, based in Oakland, was building three multifamily projects in and around the city but has bumped that upped to six. Now there is a $200-million investment on tap for Madison Park. However, these projects are hard to finance, with high construction costs, and Oakland rents coming in at $3.50 per square foot compared to the $8 per square foot in San Francisco.
A recent Marcus & Millichap report on the second half of the year focusing on the self-storage sector shines some light on the Oakland area’s economy. The economy for the entire East Bay is projected to increase by 2.7 percent this year, totaling 29,500 jobs, though that number is down from the 31,800 new positions created in 2014. Year-over-year new-unit multifamily completions are expected to jump by 25 percent this year.
Meanwhile, Oakland office rents are trending up in the area, according to JLL. The vacancy rates are currently at 8.9 percent, and the asking rent is at $39.47 per square foot. Net absorption increased by just more than 223,000 square feet year over year.
Finally, the industrial market is trending well in the region. Cushman & Wakefield has an industrial report on the East Bay, and the numbers look good. It says that the Oakland area is seeing historically low vacancy rates due to a constraint on supply of new product.
What do you think? Is Oakland the new hotspot of the Bay Area as an alternative to San Francisco?