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Oakland Retail Experts Discuss the City's Greatly Improved Environment


The latest installment of RENTVís series of commercial real estate conferences continued on September 14th, 2017, when we held our Oakland State of the Market Conference at the Waterfront Hotel in Jack London Square. It was a half-day affair featuring high-level panels covering the cityís office, retail, finance, and industrial markets.

The retail experts at the conference delivered a well-prepared presentation that took a neighborhood-by-neighborhood, inside look at what is happening around Oakland. The presenters were:

- Keira Williams - Retail Specialist, Economic and Workforce Development, City of Oakland
- Jamie Flaherty Evans - Retail Specialist, Colliers International
- Solomon Ets-Hokin - Senior Vice President | Retail Services Group, Colliers International

L-R: Flaherty-Evans, Ets-Hokin, Williams
L-R: Flaherty-Evans, Ets-Hokin, Williams
Beore focusing on the neighborhood specifics, the trio first discussed the macro environment for retail, which included the changing tenant dynamics and the explosive economic climate in San Francisco and the Bay Area. The outmigration from San Francisco because of the cityís high costs have led to a surge in housing demand in Oakland and, since that is the main driver of retail, the city is seeing the subsequent increase in retail demand and the creation of all sorts of new retail and restaurant concepts here.

The speakers noted that the evolution in the industry, if you can call it that, has transformed the concept of successful retail beyond being simply a place just to shop, but to somewhere that people can enjoy a greater experience. This has led to the opening of many new restaurants and bars in Upton, Downtown and Temescal.

Another trend mentioned is the move to less formal dining, which is leading to higher-end restaurants with big floorplates facing tougher economic conditions and, in some cases, closing altogether. Services, such as hair, nails and drinks, are the things that seem to be doing well, as the panel noted that milennials are less about having stuff than having experiences. They tend to live smaller then previous generations, and get married later. They also tend to live in smaller units and closer to work, so they bike and use public transit more as well, and often putting off getting their driverís licenses until later.

While malls, power centers and big boxes are facing much greater challenges these days, the panelists noted the positive trend in urban retail and urban places. Solomon made the interesting point that 90% of retail stores are operated by companies with less then 20 employees.

The panel then turned its attention to describing the various retail opportunities, new projects and new tenants in the different Oakland retail submarkets.

Starting with the cityís outskirts and heading downtown, the panel began their discussion with The Hills, in Montclair, where a group of residents in the area are urging the city to get more hip. So, if you have a cool concept, contact Keira.

The Oak Knoll project by SunCal will have a retail component, with ambitious plans for a 70k sf center within the residential and community uses. Also in the area, the Lincoln Square shopping center by Terramar Retail Centers is going through a renovation. The CVS and the Safeway, which do big sales out of their stores, make the other shops in that center all the more valuable.

In Central East Oakland, the Seminary Point shopping center, at Foothill Blvd, Seminary Ave and Bancroft Ave, is under construction. It is anchored by a Walgreens, with strong leasing activity on the other stores. Solomon noted how the Walgreens project is important because itís an example of a successful public/private project.

At Eastmont Town Center, Keira highlighted a parcel owned by the city where they are working with Starbucks to put one of their community stores there. She noted how this area is heavily underserved but it has good access to the 580 and the 880 freeways. Perhaps holding the area back, but also perhaps presenting an opportunity is the fact that the area is home to many social service organizations and government uses.

In North Oakland, the panelists discussed The Ridge, a revitalized shopping center with a 65k sf Safeway owned by Terramar. Phase I has been completed, but after Phase II was cleared they found asbestos in the old Chase building, so that is on hold for now. The Safeway is really driving sales there so rents are in the $60/sf/yr NNN range. While they described the Phase II plans, and asking rents, as very ambitious for Oakland, given where sales numbers are, they did say that if a Crate and Barrell or REI type tenant came to Oakland it would likely be here.

Across the street from there are two recent projects - a senior housing complex above retail and another mixed-user with market rate apartments above ground floor retail. Over by Broadway near 40th there is a little "restaurant row" and they see lots of interest here, so there are some very interesting things happening in this section of town.

Jack London Square, originally envisioned as a festival marketplace, which has not entirely come to fruition, is experiencing a bit of a renaissance with a lot of good stuff happening. Besides the very interesting festivals, the stores are all locally owned, such as Oakland Supply, and several major restaurants drive the traffic, such as Plank, Scott's and Kincaids. While it is a scenic location and a great environment right on the water, the downside is that it is somewhat isolated. Much of the space is owned by CIM, a very experienced owner of urban places around the country, and they have Lockehouse on the leasing team. The mentioned that there are new projects planned around the area and a recent Starbucks deal had a rental rate in the $3.50/sf/mo NNN range.

Temescal has a great deal happening with a couple of projects underway. At 51st and Telegraph there is the Nautilus project getting underway that will have a Whole Foods 365. The panelists commented that Temescal has a promising future, since it is a cool urban retail village between 51st and 40th. Space is going for between $2.50/sf/mo NNN on the low end, while on the high end, at the Walgreen center, at 51st and Telegraph, rent is over $5/sf/mo.

The Broadway Valdez district, which is the stretch of Broadway from the 580 to Grand Ave, has been a focus of the city for some time invested tome and funds for a specific plan, wanted to better utilize lands, old auto and parking lost , could have critical mass of retail there. There is a new project which has a Sprouts, designed by Ken Lowney and leased by Lockehouse, which is fully leased. Since that project was built, the new plan was put in place, which gave new projects a streamlined approval process.

At the north end of this district, at the upper part of Broadway, there are the two major hospital campuses, providing a steady consumer base of employees and patient families. In this area, a CVS store has reused the old Firestone Tire building next to the Grocery Outlet. Also 3300 Broadway and 3000 Broadway are coming up, which will have retail under apartments. The Broadway is the largest, at Hawthorne and Broadway, near 30th next to the Sprouts, which Jamie and Solomon are leasing. It will have 20k sf of brand new retail space. It will have good parking and there is a 1,000-car garage nearby, creating a daily needs shopping village. They predict many of the old auto uses will be turned into retail, since the buildings will work well for that and have good charm and appeal. The area gets strong rents too. The 27k sf Sprouts is said to be in for about $45/sf/yr, the Mattress Discounters is in for about $5/sf/mo, and they predict the new space at 3000 Broadway will also generate those type of strong rents.

Solomon noted that what CVS accomplished with the Firestone Building, and the cost involved, is a testament to the strength of the area. Keira noted that the high value of the land in this area means that much of the activity is driven by multifamily uses, so to help create the retail uses they want here, as part of the plan, the has created "retail priority sites," which will allow for housing above if a certain amount of retail is also provided.

Moving to the Triangle part of the Valdez area, one has to start with The Hive, the game changing extremely successful project by The Signature Group, with great eating, retail and fitness type uses. There is a Hive phase II planned on an adjacent site that was a former auto dealer, which will have a West Elm hotel, featuring furnishings from the web site. At 27th and Broadway, Hanover is developing a site that is being leased by Lockehouse and there a few more mixed-use projects planned that will add almost 100k sf of new retail to this area over the next several years.

There is a new Orchard Supply and Whole Foods in the area, but the panel felt that for the new supply it will be restaurants that drive the success. In addition, since the value of the projects will be driven by the residential rents achieved, the developers will be interested in getting retailers that drive the sense of place, leading to higher residential rents. The panelists noted that several leases have recently been signed at some of the new projects with rents in the $3.00 - $3.75/sf/mo NNN.

Moving to Uptown, one of the most active areas of Oakland, there has been a lot going on. The most notable has been the on, but now off, occupancy of Uber at the building known as Uptown Station, which Uber had bought but is now selling. There is retail on the ground floor of the building but plans for that space were not finalized by Uber so that will certainly evolve. Across the street is the beautiful green former I Magnin building that HP Investors bought, along with several other buildings in downtown Oakland. HP is redoing the retail space along 20th at the I Magnin building and is looking for stores to fill it.

In Lakeside, Keira mentioned Howden Markets, a gourmet corner market, as an example of the type of local use that can grow in Oakland. The panelists felt this area presents a huge opportunity over the next three years with the dense housing and number of office users and current lack of new retail. A new project under construction is 1640 Broadway, being leased by Lockehouse, which will have a "cool-looking retail tower".

And lastly, in Downtown and Old Oakland, highlights include the renovated Latham Square, where Telegraph and Broadway intersect. They have been having Third Thursdays there, with free live music, local entertainment and dozens of creative spaces staying open late. New tenants here include several restaurant groups and uses such as Blue Bottle Coffee in Old Oakland. As for new projects, they mentioned the tower at 13th and Franklin being built on the site that was the Merchants Garage. Another tower half a block from there on 13th, designed by Ken Lowney, will get built over the next few years and another that is planned by The Martin Group will add 400 units to the block bound by 11th and 12th Streets, and Harrison and Webster Streets. Solomon noted that these planned towers make this section the Recon Hill of Oakland.

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