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I-680 Corridor Office Market Report

2nd Quarter 2022

Posted In — Market Research | Market Report

The 2nd Quarter Tri-Valley office and office/ flex market was a dichotomy of developments highlighted with the unfortunate planned exodus of Chevron from the Tri-Valley and both completed and pending large lease and sale transactions.

The office market benefitted from two existing Tri-Valley tenant expansions. The deals removed two large subleases (totaling 219,586 SF) from the market. However, there remains 897,715 SF of available sublease space still on the market and that number does not include the roughly 1,000,000 SF that AT&T would vacate at BR 2600 (San Ramon) if the right user surfaced for that sublease partially expiring in 2027. Vagaro, Inc. subleased three of the four floors that Ellie Mae has had on the market at Rosewood Commons (the 4th, 5th, and 6th floors at 4430 Rosewood Drive, Pleasanton) in taking 106,016 SF. Vagaro will move across Interstate 580 to their new, expanded headquarters location and put their current 19,011 SF Dublin Corporate Center (“DCC”) office on the market for sublease. Vagaro’s, management is encouraging employees’ return to the office vs the recent work from home (“WFH”) trend. Another large expansion saw Snowflake, Inc. increase their footprint at DDC in taking the entirety of the 4140 Dublin Blvd. building totaling 148,078 SF. The expansion of 113,570 SF was formerly a Callidus Software sublease. Snowflake also clearly visualizes a return of its’ workforce to the office with this commitment.

Despite the above large lease transactions, the core multi-tenant office buildings in the Tri-Valley saw vacancy remain basically unchanged just slightly down from the 1st Quarter 2022 in moving from 23.03% to 22.68%. Overall touring activity of tenants 1,000 to 10,000 SF remains abysmal. The lack of new users in the market and/or re-entry of WFH employees is compounded by the fact that tenants in multi-tenant Class “A” and “B” buildings are generally vacating vs. renewing their leases upon lease expirations, or in many cases, if maintaining an office presence, downsizing. Weighted full service asking rents in the combined Class “A” and “B” multi-tenant marketplace fell slightly quarter to quarter moving $3.04 full service from $3.05.

In Dublin, the long vacant former Corrie Center, now named “The Edge”, is rumored to have a school use interested in purchasing the 81,575 SF property and working through permitting with the city of Dublin. The property is in cold shell condition.

In Danville, at the Rose Garden, Compass residential real estate, just completed a lease of 10,523 SF in the long vacant second floor shell space. This mixed-use project has second floor office space and ground floor retailers that include Sloats Garden Center, Café Esin, and Amici’s.

As previously alluded to, Chevron is marketing its San Ramon Headquarters campus for sale. The 13 building campus totals over 1.47M SF situated on 92 acres and has been the company’s global HQ for over twenty years. The site will most likely be repurposed for a life science conversion, mixed use residential or new office HQ occupier. Chevron is rumored to be keeping a small presence within Bishop Ranch, but most employees will relocate to Houston, Texas over time.

On the office/flex front ProSomnus Sleep Technologies, Inc. leased 32,219 SF at Sunol Center II (5673-5675 Gibraltar Drive, Pleasanton). They will relocate and expand from their current location at the Arbor. Atonarp, Inc., in relocating from Hayward, leased 10,515 SF at Inglewood Place. Inglewood Place is a traditional Class “A” office building but has an existing ground floor, R&D space formerly occupied by Jabil, Inc. In Livermore, S2 Genomics Inc. leased 13,219 SF of office and lab space at the Vineyard (7683 Southfront Road). On the rumor front, Unchained Labs is circling the expansion/ renovation project at 4747 Willow Road (Park 47). That project can be expanded from its current footprint of 125,000 SF to 264,000 SF. Unchained Labs will likely renew their current Bernal Corporate Park location (6870 Koll Center Pkwy.).

As reported last quarter, Tarlton Properties and Harrison St recently purchased 4125-4255 Hopyard Road, Pleasanton (Britannia Business Center I) has been rebranded Pleasanton Labs with new ownership looking to capitalize on growing bio-tech interest in the Tri-Valley. Trading this past quarter was 4480 Willow Road, a 63,202 SF R&D building that will soon be 100% vacant and repositioned by the buyer, Cannae Partners, also looking to chase R&D and biotech users.

The traditional mid-summer ‘lull’ in market touring activity is now upon us. Absent of a spike in office activity this fall, market asking office rents will erode. There has been little impetus to lower asking rents in a market void of office tenants but come this fall look for Landlords to post lower asking rents to try to drive office users to their specific project. There will be continued tenant concessions in a very tenant friendly marketplace.

 
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