East Bay suburbs are benefiting from an increase in office tenants migrating from the outer markets, according to a new report from brokerage CBRE. This trend stems from employees wanting to work closer to where they live.
The number of spaces tenants are looking for increased to 2 million square feet in the first quarter, with 20 percent, or one in five, of active tenants coming from the outside market to the I-680 corridor, the report found.
The corridor follows I-680 from Concord south through Walnut Creek and San Ramon to Livermore. It is located east of the I-580 corridor, which includes the larger and more numerous cities of Oakland and Hayward.
The report outlines that during the pandemic, which has required employees to work remotely, many have decided that long commutes are no longer necessary.
CBRE’s Jeff Birnbaum said: “Workers are used to working from home and have flexibility in their schedules, so there is much less desire to spend more than an hour a day commuting than before the pandemic. .”
Companies may also prefer suburban markets, where office rents are generally lower than those in urban areas.
“These tenants are also operating in a cost-conscious environment, for example, Walnut Creek has lower office rents than San Francisco,” explained CBRE’s Andy Schmidt.
The average asking rents in the two markets contrast sharply, with annual rents of about $36 per square foot in the hallway and $74 per square foot in San Francisco, according to data collected by Colliers.
Most of the tenants coming to the I-680 corridor are from San Francisco; however, some are from markets outside the Bay Area because “they want to hire here,” Birnbaum said.
The largest new leases in the first quarter were Berkshire Hathaway’s 28,000 square feet in Walnut Creek, followed by Chipman Corporation’s 12,000 square feet in San Ramon.
The current market has kept investment sales and leasing activity quiet at the start of the year and is expected to remain so throughout 2023, the report said. When companies want to bring employees back to the office, they often look for attractive amenities that may be easier to find in the suburbs.
“The idea of creating a precinct where people live, work and shop has been around for a while, but has become more apparent during the pandemic,” Schmidt said. “The suburban market in the Bay Area offers access to larger retail stores and restaurants, and there is also positive activity in the inner-city suburban market as more companies adopt hybrid work models.”
