SKS granted extension on big Oakland tower
San Francisco Business Times, 1/25/2013
SKS Investments has secured up to four more years to start construction on a 20-story tower at 1100 Broadway.
The developer entered a development agreement with the City of Oakland to build the 310,285-square-foot tower in 2007. It already received an extension in 2010 that required construction to start in June of this year.
With no anchor tenant in hand, SKS asked for yet more time.
“We feel quite strongly that the next 12 months will be a much better opportunity to capture those anchor tenants we’re looking for,” said J.C. Wallace, vice president with SKS. “We’re committed to the project.”
The developer wants the building at least 50 percent pre-leased to break ground and hired Colliers International to handle the leasing.
Oakland’s city council approved the extension, and the plan will go before the redevelopment successor agency in early February for the final approval.
The development agreement also includes a deal for SKS to buy a 145-space garage owned by the city for $5.9 million. SKS has given the city a $100,000 deposit for the garage.
Under the new timeline, SKS can start construction by 2015 or ask for a further two years with an additional $100,000 for the garage deposit. Without the extension, SKS would owe the city $440,000 for defaulting on its agreement.
The building will incorporate the historic Key System building and feature 9,810 square feet of ground-floor retail. The design has already locked in LEED platinum certification from the U.S. Green Building Council.
SKS is not alone in seeking tenants for unbuilt office space. Shorenstein Properties wants a tenant for its 23-story, 600,000-square-foot tower development site at 601 12th St. The Swig Co. is working on a 1.5-million-square-foot expansion of Kaiser Center, an office and retail complex near Lake Merritt.
Meanwhile, Oakland’s Class A office market ended last year with a 16 percent vacancy rate and about 1.08 million square feet of available space, according to Cornish & Carey Commercial Newmark Knight Frank. Average asking rents ranged between $28 and $35 per square foot.
Two major factors in landing an anchor tenant are how high San Francisco office rents go up and whether tenants want new space, said John Dolby, a broker with Cassidy Turley who is marketing Shorenstein’s development site.
“We’re going to see more activity in 2013 from San Francisco,” Dolby said. “First, it was nonprofits coming over. Now, it’s the bigger tenants who look at their renewal rates and locations in San Francisco and say, ‘Let’s see if we can keep our rent flat or lower our rent and move to Oakland.’”