OAKLAND OFFICE MARKET FLUSH BUT STILL CASH-FLOWING

The Downtown Oakland office market is changing. Where before we saw vacancies as high as 20-50%, depending upon the specific product and location, now we see compression to below 10%. For office, that represents full occupancy because a 10% or lower vacancy means an owner can choose to rent a space by simply lowering the price incrementally or by offering tenant improvements to draw a tenant way from a competitor.

As long as this office rental market is sustained in Oakland it makes a well-located office or office with retail purchase much less risky. That’s important because, while cash flows on multifamily have been under pressure for a long time cash flows from office have not: it remains possible to purchase a well located office building in Oakland with capitalization rate above 6% and cash-on-cash return above 10%. That is no longer possible in the multifamily market.

But the key question in relation to cash flow is risk. Call me to discuss Oakland Office opportunities.

DID YOU KNOW?

Current 10-year fixed-rate loan rates allow for long term protection against interest rate changes while still allowing for high cash-on-cash return for properties (such as well-located Oakland office) with cap rates in the 6+ range.

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