I-680 Corridor Office Market Report

2nd Quarter 2023

Posted In — Market Research | Market Report

The second quarter of 2023 was a blur of inactivity, languishing deals, renewals, and general stagnancy.

Class A and B Multi-Tenant Tri-Valley Office Properties saw vacancies inch higher to 24.51% from the prior quarters’ 23.97%. Rental rates remain unchanged and marketed sublease space ticked higher to 1,495,960 SF verse 1,394,483 SF at close of the first quarter 2023. Tri-Valley Office-flex space exhibited softening as vacancy in that market sector rose to 14.61% from 11.24% in Q1.

Activity in the quarter was limited to renewals and market tours of long tenured Tri-Valley tenants looking for amenities, suite upgrades, less footage or renewal leverage. Downsizing and the lack of migration of office users into the Tri-Valley from other Bay Area markets coupled with no “start-up” business leasing space continues to impact vacancy rates. The Tri-Valley optimism speared by schadenfreude feelings of Bay Area Urban demise has not resulted in office users flocking to the safe confines, chain restaurants, and free parking that the Tri-Valley provides.

Notable office transactions in the quarter include PTC Inc. (formerly ServiceMax) renewal in 38,459 SF at Rosewood Commons (4450 Rosewood Dr). The user toured the market for a short term 15,000 SF downsize solution but were enticed to renew in their current premises with rumored aggressive terms. Rosewood Commons also landed ADP in about 21,000 SF at 4410 Rosewood Dr (4th floor). ADP will relocate from 4125 Hopyard Rd, Pleasanton. The deal duration from touring to lease execution took roughly a year to ink. Cornerstone OnDemand, Inc. (formerly Saba Software) renewed their lease at Dublin Corporate
Center (4120 Dublin Blvd.) for 19,430 SF.

In San Ramon, KB Homes downsized and renewed their lease at Bishop Ranch 8
(5000 Executive Parkway). KB Homes shed about 5,000 SF in the renewal going from 22,862 SF to 17,302 SF. Similarly, and on a larger scale, Robert Half will
downsize in the Ranch from Bishop Ranch 3 from roughly 250,000 SF to 70,000 SF in moving into Bishop Ranch’s top end BR 2600 property. On the flex front, AVI Systems Inc. leased 12,378 SF at 6612-6616 Owens Drive, Pleasanton. The audiovisual tech company expanded out from Fremont. The Boeing Company renewed their lease at 5753 W. Las Positas Blvd., Pleasanton, but terms of the 47,000
SF renewal were kept confidential. SequLITE Genomics, a new biotech company to Pleasanton, subleased second generation lab space at North Creek in Bernal Corporate Park.

Looking forward we are looking forward to a market that might include office users return to office space, new tenants entering the market, and migration of
office tenants to the Tri-Valley from distressed Bay Area urban centers. September, that traditional active time of year when school has started and decisions makers are back from vacations, will hopefully bring an uptick in leasing activity. 2023 has no hope of shoring up multi-tenant offices vacancies that are approaching 30% or, shutting down eroding rental rates, but a strong fall leasing campaign may give hope of a healthier office market in 2024.

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