Eastline Project, Bigger than Salesforce Tower, Seeks to Transform Oakland

JULY 6, 2018

Two blocks north of Oakland’s 19th Street BART Station are a shuttered burger stand, a public parking Garage and short commercial buildings.

The barren site at 2100 Telegraph Ave could turn into one of the largest developments the city has Seen. Named Eastline by its backers, the 1.57 million-square-foot office project would be bigger, in square footage, than San Francisco’s Salesforce Tower.

The project goes before Oakland’s Planning Commission on July 18 for its first major vote. If it passes, the City Council could approve it this year. It would join two other office towers under construction in Oakland, which is seeing record-high rents and the tightest market for downtown office space in the country, according to brokerage CBRE.

The vacancy rate, at 5.3 percent, is lower than even San Francisco’s — which is bad news for companies eyeing Oakland as an escape from pricey rents across the bay.

“There are not too many development opportunities left on transit-oriented sites like this in the urban core. You have to make the most of them,” said AlanDones¨ CEO of the Strategic Urban Development Alliance, one of the Eastline project’s developers. “Oakland really needs to be more than just a bedroom community. We really need to maximize jobs and maximize the ability for people to live here and work here.”

With San Francisco development constrained by Proposition M, the city’s 1980s cap on office-space approvals, Oakland appears poised to seize a greater share of Bay Area job growth. A combination of tenants migrating from San Francisco, internal growth and barely any office construction in the past decade has already boosted rents from around $35 per square foot in 2015 to upward of $60 per square foot today, according to† broker.

But the city hasn’t yet lured a major fast-growing tenant during the current economic boom. It came lose in 2015, when Eastline’s other partners, Lane Partners and Walton Street Capital, sold Uptown Station to Uber.

The ride-hailing company’s deal to occupy all of the former Sears building — just a block south of Eastline — appeared to validate Oakland as a destination for upstart tech companies. But Uber’s decision to sell the building again in 2017 made Oakland’s future less certain. Uptown Station is still vacant and finishing renovations.

Eastline, which calls for about five times as much office space as Uptown Station, wants to lure an even Bigger tenant.

“It’s important for all communities to have an appropriate mix of housing and jobs. The Eastline project shows that there is growing demand for new office development in Oakland,” said Justin Berton, spokesman for Mayor Libby Schaaf.

Oakland’s other two office towers under construction are Shorenstein’s 601 City Center and Ellis Partners’ 1100 Broadway. Both projects have anchor tenants, though neither is likely to get written up in TechCrunch or Recode. Blue Shield is relocating from San Francisco’s 50 Beale St. to take about a third of the space at 601 City Center. The University of California’s Office of the President, currently at 1111 Franklin St. in Oakland, is taking a portion of 1100 Broadway.

John Dolby, a broker with Cushman & Wakefield who is leasing 601 City Center, said tour activity for the remaining 400,000 square feet at the building has been strong. He’s also skeptical that Oakland needs to land a big tech company to continue to be a strong office market.

Dolby said: “601 is the largest block of space now between Oakland and San Francisco. We feel very confident.”

More jobs in Oakland would help balance the region’s growth and cut commute times, according to JRDV, an urban planning firm that’s completed area plans for the city of Oakland. A ride from BART’s new Antioch Station takes less than an hour, for example.

“The Bay Area regionally is really developing kind of a dual core, in some ways a combined core, of downtown San Francisco and Oakland,” said Morten Jensen, president of JRDV. “You certainly want to have housing and jobs on both sides. …It really is very inefficient to have everyone going in one direction and coming back.”

In its most recent fiscal year, BART reported three times as many weekday exits in the busiest downtown San Francisco stations (Embarcadero, Montgomery and Powell) as in Oakland (12th Street, 19th Street and Lake Merritt). Crowding on trains going through the Transbay Tube is so extreme that the system is exploring a second bay crossing.

Encouraging more density and more jobs is critical for Oakland’s future, said Ed McFarlan, principal at JRDV, which is also working with SUDA on a West Oakland project at BART. Office development generates hefty taxes, while housing revenue is roughly break-even for the city’s finances, he said.

“Without new investment, you’re not going to have a progressive city. We have a structural deficit,” McFarlan said.

The city projects that pension costs will escalate by at least 49 percent over the next five years. In December, Oakland city employees went on strike for higher pay.

“The city’s been conflicted about bringing in tech,” McFarlan said, “Oakland’s lack of a clear vision has always been its Achilles’ heel.”

There are other hurdles for Eastline. One of its biggest assets — its proximity to the 19th Street BART Station — also creates a challenge. The BART tunnel to MacArthur Station runs across half the site. Any new buildings have to avoid putting excess weight and stress on it. The engineering challenge for building foundations will add around $30 million in costs, said Dones, who believes that’s a major reason the site hasn’t been developed yet. The entire Eastline project could cost up to $1billion, he added.

Additional costs are also why Dones favors an office project, rather than an alternative plan that also includes housing, which is also being studied. With a major office tenant, Eastline would generate hundreds of millions of dollars more in annual taxes compared with a project that includes housing, Dones said.

The project faces opposition from the Oakland Heritage Alliance, which said the size of the project is “problematic” given its proximity to historic buildings such as the Paramount Theatre. This year, preservationists called for Eastline to add setbacks so it was farther from its neighbors. The city’s planning department disagreed, writing in a report that Eastline wouldn’t significantly affect its surroundings.

Dones said the developer continues discussions with neighbors.

If approved, Eastline hopes to start construction next year.