WESTERN SNAPSHOT, JUNE 2008

Oakland, California, Retail Market

Covering 56 square miles with a diverse population exceeding 400,000, Oakland is the largest city in the East Bay area, which comprises Alameda and Contra Costa counties. Densely populated with more than 150,000 households, the City of Oakland is developing a strategy to capture a potential $1 billion of annual comparison goods retail sales.

Despite the national economic downturn, Oakland attracts strong national and local tenants because of the market’s potential. In the grocery segment, Whole Foods Market, two Trader Joes and Farmer Joes opened stores within the past year. All of them have met or exceeded sales expectations. Safeway has plans to relocate and expand its Rockridge Shopping Center location to a 75,000-square-foot lifestyle store. The plans for Rockridge Center also include a total redesign and attracting a 40,000-square-foot mini-anchor. Elsewhere, Lucas Harvest Market plans to open at the Foothill Square, which will be part of a 193,000-square-foot renovation planned by the developer Jay-Phares Corp.

According to a City of Oakland’s retail staff specialist, Target, Costco, Lowe’s Home Improvement Warehouse, The Home Depot and Tesco (Fresh and Easy) are actively looking to locate — in some cases multiple stores — in Oakland. It is also rumored that Mervyn’s and Ross Dress For Less are looking for sites.

One of the targeted areas for development is near the coliseum in East Oakland. Diversified Investments has plans for the Coliseum Shopping Center development on a 12.5-acre site off I-880. McFarlane Partners also has plans for 20,000 to 30,000 square feet of retail in its Coliseum Transit Village near the BART station. Another unique retail development on the horizon is Signature Properties’ Oak-to-9th mixed-use development, which will include 200,000 square feet of retail.

The historic Ninth Avenue Terminal is proposed for redevelopment as The Vintners Hall, a 90,000-square-foot collection of artisan winemakers who use grapes harvested and delivered from nearby agricultural areas. Jack London Market, a mixed-use open air building that will include 70,000 square feet of retail, is under construction. Completion of the project, a joint venture between Ellis Partners and Jack London Square Investors, is slated for first quarter 2009 and will become part of the larger waterfront development featuring 167,000 square feet of retail.

The Fruitvale, Rockridge, Temescal, Piedmont Avenue, Lakeshore and Montclair districts are heavily populated by locally owned shops. These neighborhood retail nodes offer more personal shopping experiences, more unique products and more convenience. However, these popular neighborhood retail centers are not replicated throughout the city.

In addition, although Oakland may have strong commitment or interest from national tenants, there is still a vacuum of comparison-shopping opportunities. Most of Oakland’s residents will head out of town to neighboring cities such as San Francisco, Emeryville, Walnut Creek and San Leandro to satisfy their shopping needs at major department stores, lifestyle shopping centers and other big box stores. Oakland’s retail leakage is estimated at $1 billion per year and increasing.

Oakland also faces the challenge of urban infill retail development. The high cost of land, the requirement to assemble land parcels, parking access, an uncertain entitlement process and the changing economics of mixed-use developments because of the slumping housing market make it a challenge for any developer seeking a profit on its project.

However, with a successful retail strategy, the East Bay’s largest and most populous city will be able to increase city services, employment and the quality of Oakland’s neighborhoods as well as the lives of many of its residents.

Reesa Tansey, sales and leasing associate, and Sandra Weck, senior vice president, are based in Colliers International’s Oakland and Pleasanton, California, offices, respectively.

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