It’s official: PG&E will pay $900 million for its office headquarters building in Downtown Oakland, a soaring price in a slumping office market.
The investor-owned utility will pay $989 per square foot for its 910,000-square-foot hub at 300 Lakeside Drive, with the purchase to be completed in 2025, the San Jose Mercury News reported. The seller is TMG Partners, based in San Francisco.
When Pacific Gas & Electric announced its move to the East Bay in 2020, it received a lease-option to buy its new home this year for $892 million, or $980 a square foot.
It began moving its workers into the crescent-shaped building by Lake Merritt last year. The purchase, but not the final price in 2025, was announced earlier this month.
PG&E’s move to Oakland came in conjunction with the sale of its long-time headquarters in San Francisco to Houston-based Hines and the National Pension Service of Korea. The September 2021 deal for the 1.5-million-square-foot campus was for $800 million, or $533 per square foot.
The sale is a part of PG&E’s long-term plan to relocate its headquarters to Oakland to reduce expenses by shedding half its offices by eliminating satellites in San Ramon and Concord.
Its 35-year-lease for 300 Lakeside was the largest lease ever in Oakland or San Francisco. The $900 million purchase of its headquarters building also appears to set a local real estate record.
The price represents a windfall for TMG and the Oakland market, where office vacancy in the core business district of Downtown, Uptown and Lake Merritt hit 35.7 percent last month. Office landlords in Oakland have started to slash rents, after holding steady through the pandemic.
TMG bought the former Kaiser Permanente headquarters in 2020 for $450 million, or $495 per square foot.
While Oakland comparisons are scant, PG&E is expected to pay an extraordinary premium for its new office hub.
For comparison, Wells Fargo is now closing a deal to sell its 355,000-square-foot office tower in San Francisco for an expected $42.6 million, or $120 per square foot, for a $65 million loss.
In August 2021, Swift Real Estate Partners bought a 565,900-square-foot tower at 1111 Broadway in Oakland for $327 million, or $578 per square foot.
This month, Alameda County announced it would auction off its 192,900-square-foot office campus at 6775, 7001 and 7195 Oakport Street near the Coliseum this fall with the minimum bid at $40 million, or $207 per square foot.
— Dana Bartholomew
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