Office vacancy rate in Greater Downtown Oakland climbs to 36%

The offices in Greater Oakland just grew emptier.

Office vacancy in the core business district of Downtown Oakland, Uptown and Lake Merritt hit 35.7 percent in the second quarter, rising 1 percent from the previous quarter, the San Francisco Business Times reported, citing figures from Cushman & Wakefield.

The climb in empty cubicles marks the fourth quarter for rising office vacancies within the 6.3 million-square-foot submarket.

The hollowing out of Oakland’s core office towers comes from death by a thousand cuts, real estate experts say, rather than the loss of major leases. The trend began in 2019, then grew worse during the pandemic.

The increase was largely driven by what John Dolby of Cushman & Wakefield calls “dinks and dunks,” or small swaths of space that were either put up for sublease or let go by office tenants whose leases expired.

“It’s 5,000 square feet here, 10,000 square feet in another building,” the Oakland-based Dolby told the Business Times.

He said he doesn’t expect the core business district’s vacancy rate to climb much further.

A decrease in vacancy would require office tenants to make major expansions or out-of-market tenants to begin moving into Oakland, he said.

Both events helped crowd the Oakland commercial leasing scene in the 2010s, turning the city’s office market into one of the tightest in the nation.

“Most of those deals — in 2016, 2017, 2018 — were all new start-ups and tenants coming from outside the market,” Dolby told the newspaper.

That’s less likely now. While a third of San Francisco’s offices are empty, leasing rates there have dropped, making the local market more favorable to tenants.

“As increases in affordability in San Francisco allow people to remain in San Francisco, it means less opportunities for Oakland,” Alexander Quinn, who leads research in Northern California for JLL, told the Business Times.

— Dana Bartholomew