Lane Partners buys historic Sears building in Oakland to lure tech tenants

Lane Partners plans to convert the Sears building into a retail and tech hub in the heart of Oakland’s booming Uptown neighborhood.

The real estate investment firm, based in Menlo Park, beat out several bidders and paid $25 million or about $63 per square foot for the historic, 400,000-square-foot building at 1945 Broadway from Sears Holding Co.

The firm plans to renovate the six-story structure to house a space large enough for a major tech tenant and rebrand it as Uptown Station.

“Uptown Station will be embraced by the tech sector due to great architecture, new technology, collaborative space and a great live/work environment,” said Scott Smithers, managing principal of Lane Partners.

The property, built in 1925, features 66,000-square-foot floorplates and currently houses just one tenant, a Sears department store, on the ground floor. Sears plans to vacate the space within 90 days.

Smithers said the spacious floor plans, historic architecture, and expansive windows make the building ideal for “creative space” that many technology tenants want. That type of space has become scarce in both San Francisco and Oakland — especially in the range of 350,000 square feet.

The building also sits right on top of a BART station and is located in the middle of Uptown. The area has become a thriving entertainment district. Over the past several years, dozens of new restaurants and bars have opened, as well as hundreds of new apartments and condos.

“For location, it’s a no-brainer,” said John Dolby, an Oakland broker with Cassidy Turley. “If (Lane Partners) makes the building into creative space, it will be very desirable.”

Some tech companies like Lyft, a maker of an app for car sharing services, looked in Oakland, but couldn’t find a large enough space.

“(The Sears building) will be great for downtown Oakland and is going be able to attract a tech company from San Francisco,” Dolby said.

Now that the deal closed, the rehab is next. Some of the building’s windows were filled in with concrete to make it more seismically sound, so Lane Partners plans to restore the windows to make them operable and install other types of seismic reinforcements.

“The interiors are amazing,” Smithers said, noting that the floors come with 14 foot high ceilings. “We’re returning much of the facade to the original look and feel.”

The new owner expects to finish the renovations by the first quarter of 2016. Lane Partners plans to keep retail on the ground floor to “activate the street” and convert the basement level into parking.

Lane Partners already hired on a team of brokers led by Bill Cumbelich, a San Francisco broker with CBRE, to lease up the building.

The building has significant potential, said Alan Dones, managing partner and CEO of the Strategic Urban Development Alliance LLC, who tried to buy the building earlier this year, but fell out of contract. Another bidder, Strada Investment Group went into contract on the building after that, but they also didn’t close.

“We had been looking in the Oakland market for a while, so when we heard about this building, we inquired about it,” Smither said. “It was a competitive process that required an understanding of the building and for us to act quickly.”

Source: Blanca Torres Reporter-San Francisco Business Times

Bay Area commercial real estate boom on track for record year

A surging tech economy has sparked a Bay Area commercial real estate boom that is on track to make 2013 the best year on record.

New construction and renovation of commercial real estate — including office, retail, industrial and hotel properties — will exceed $6 billion this year across the nine-county Bay Area, according to this newspaper’s analysis of figures supplied by McGraw Hill Construction, a widely respected source for data about the development and building sectors.

Mike Fau, left, and Bob Gongora help install a window at a Santa Clara Gateway office complex building under construction in Santa Clara, Calif. on Monday, Nov. 4, 2013. (Jim Gensheimer/Bay Area News Group) ( Jim Gensheimer )

“High tech is spurring this — you have the Facebook, Samsung and LinkedIn buildings that have gone up or are going up, and you have expansions by Google (GOOG) and Apple (AAPL),” said McGraw Hill economist Anne Thompson. “The economy is improving in the Bay Area. You have strong hiring in high tech that is spurring more demand for office space.”

Through the first nine months of this year, the value of Bay Area commercial real estate construction totaled $4.9 billion. That already was more than the full-year totals for 2009, 2011 and 2012, and was approaching the $5.41 billion annual total for 2010.

Total commercial real estate spending in the Bay Area for 2013 is projected to be $6.3 billion to $6.7 billion. That would be the largest amount documented by McGraw Hill, whose records are based on building-permit data and go back to 1967. The current record was set in 2000, when Bay Area construction activity reached $6 billion.

The boom is not spread evenly across the region, however. Santa Clara, San Mateo and San Francisco counties all are seeing a surge in construction, while the East Bay counties of Alameda and Contra Costa are lagging far behind.

Jeff Hoopes, chief executive of Swinerton Builders, said the building boom does not appear to be a bubble. “This surge is a direct result of job creation.”

Chad Leiker, a vice president with commercial real estate firm Kidder Mathews, said the development surge resulted from rising rents, which “are finally high enough to justify developers taking risks on construction or renovation of buildings.”

The tech sector upswing has made Santa Clara County the Bay Area’s top region for commercial real estate construction, McGraw Hill found. For the first nine months of this year, commercial real estate construction in the county totaled $1.86 billion, and it could reach $2.17 billion by the end of the year. That doesn’t include the $1.3 billion Levi’s Stadium project underway in Santa Clara because McGraw doesn’t count open-air stadiums in its totals.

Among the tech companies that have contributed to the commercial real estate boom is Infoblox, a software company that struck a deal last year to expand to a new headquarters in Santa Clara. It would be able accommodate 500 employees, up from 250 in the middle of last year.

“We were bursting at the seams in tired old spaces in Santa Clara,” said Shawna Belardi, global facilities manager for Infoblox.

This year, Infoblox moved into an office complex that had undergone an extensive renovation by developer Bixby Land, which added fire pits, sports courts, a gym, a cafe and other amenities to help the company attract and retain engineering talent.

The Infoblox renovation is part of a trend. In the South Bay, much of the construction involves face-lifts or replacements of existing buildings, said Phil Mahoney, executive vice president with commercial realty firm Cornish & Carey.

“The renovation and upgrade of existing buildings is unprecedented,” he said. “I have never seen anything on this scale in 30 years of being in the business.”

Builders also are succeeding with new projects. Santa Clara Gateway, a 916,000-square-foot complex near the Great America amusement park, found tenants quickly, said Andrew Goodman, regional vice president with Irvine, the project developer.

“Dell and Arista were the first deals, and then we got Global Foundries,” he said.

Plenty more projects are in the pipeline.

Apple is expected to begin construction next year on its new campus in Cupertino, which published reports say could cost $5 billion. Google, while facing delays with its second campus at the NASA Ames Research Center, still intends to build the Mountain View complex.

Jim Beeger, a senior vice president with Colliers International, does not see the market cooling any time soon.

“At the beginning of this year, we had 20 tenants that were looking to lease space of 100,000 square feet or greater, and now the number is 31,” he said.

Experts say further spurts of commercial construction could result from the desire by young tech workers to live in urban centers such as San Francisco and San Jose — even if they work elsewhere in Silicon Valley. To accommodate those workers, developers are laying plans for housing, office and retail clusters on or near light rail, Caltrain or BART train routes.

After Santa Clara County, San Francisco County is poised to post the second-highest commercial construction activity in the Bay Area this year with a total of $1.95 billion. That would be well ahead of the totals for 2011 and 2012, but below the level of 2010, McGraw Hill reported.

San Mateo County is expected to see $765 million worth of commercial real estate construction this year, which would be six times the amount for 2012.

In contrast, the East Bay remains in a slump. The combined totals of commercial real estate construction in Alameda County and Contra Costa County are on track to reach $681 million, which is lower than all of previous four years.

“The East Bay is a real laggard in development right now,” said Edward Del Beccaro, a managing director with Transwestern, a commercial realty firm. “The main construction activity in the East Bay is medical buildings and some retail. Otherwise, the East Bay is dormant.”

The remaining Bay Area counties — Marin, Sonoma, Napa and Solano — are projected to produce a combined $187 million in commercial construction, which would be 2.8 percent of the projected Bay Area total this year.

Source: Mercury News

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