REAL ESTATE NEWS

City workers have been notified to return to their offices in Oakland, where the downtown office vacancy rate keeps rising.

Starting February 18, all unrepresented department directors, deputy directors, managers and supervisors will be expected to come into the office four days a week. The four-days-per-week RTO policy will apply to all other city workers, as of April 7.

In a letter to labor leaders and elected officials, city administrator Jestin Johnson said Oakland intends to discontinue the telecommuting work program it established during the pandemic, the San Francisco Business Times reported.

Johnson said in the letter that the city would maintain its “flexibility and understanding” regarding the need for workers to “occasionally work remotely” on a case-by-case basis.

“I recognize that telecommuting remains a part of modern life and that even before the pandemic, not everyone was in the office every workday,” Johnson said.

The office vacancy rate in Oakland’s 12M square foot Central Business District hit 34.8% at the end of 2024. For the 29M square foot Oakland metro market, which stretches from Richmond in the north to San Leandro in the south, the rate rose to 23.6% in Q4, a 93 bps increase from the previous quarter, according to CBRE’s latest market report.

The overall Oakland market recorded less than 145K square feet of gross leasing activity in the fourth quarter, a 28% decrease from the third quarter. Negative net absorption in Oakland totaled minus 667K square feet in 2024.

Some of the largest employers in Oakland have cited crime concerns as the primary reason for their slow return to office buildings in the city.

In March, Kaiser Permanente, Clorox, Blue Shield and PG&E pooled their resources to fund a $10M security enhancement program for their Oakland-based employees, including escorts to and from the office and an employee safety training program.

Clorox hired uniformed security guards to escort their employees between the office and BART stations, parking garages and restaurants. Blue Shield offered a plan that paid for ride-hailing services to transport employees to and from offices. At the end of 2023, Kaiser recommended that its employees stay inside their buildings for lunch.

A group of landlords and business owners in Oakland’s Uptown District last year formed NorthLake, a private partnership to enhance security and clean up streets, aiming to upgrade the city’s reputation and protect their investments.

Oakland is facing major cuts across all city departments as it struggles to close a record $129M budget deficit.

The Leamington, a historic office tower at 1814 Franklin Street, was handed back to lender CIT Bank last month by Stockbridge Real Estate via a deed instead of foreclosure. The landmark, 11-story, 110K square foot building opened as an upscale hotel in 1926.

HP Investors’ office property at 1700 Broadway went back to its lender last year and was purchased by Agate Holdings for $2.75M, a drop of almost 80% in value.

Healthcare giant Kaiser Permanente, one of Oakland’s largest employers, disclosed in November that it plans to slash its footprint in the Ordway Building at 1 Kaiser Plaza, where it is the anchor tenant, leasing more than 366K square feet for its HQ.

The company’s lease in the 28-story building expires in February 2027 and includes a term allowing Kaiser to reduce its footprint by up to 140K square feet without having to pay an early termination fee, CoStar reported.

Source: GlobeSt/ALM