WALNUT CREEK — High vacancy rates for offices in the Walnut Creek area have conspired to produce a rare event in the Bay Area: a top-notch office building whose owner sold the property for a loss.
At first glance, the Walnut Creek office building whose value has eroded would appear to have it all.
The building is in the prestigious and affluent 680 corridor that links Concord, Pleasant Hill, Walnut Creek, Danville, San Ramon, Dublin and Pleasanton. The office property is just a block or two away from the busy Pleasant Hill BART station. That gives it appeal as a transit-oriented office building.
“This is a really good building, very close to BART,” said Jeffrey Weil, an executive vice president with Colliers, a commercial real estate firm.
Station Plaza, an office building at 3100 Oak Road in Walnut Creek, despite these marketable advantages, has suffered a brutal decline in its value in only four years.
In 2017, Lane Partners, through an affiliate, paid $15.35 million for the building, which totals 49,500 square feet.
Sometime during the summer of 2020, Menlo Park-based Lane Partners put the three-story office building on the block. Property experts said the office was priced for sale at $14.5 million — 5.5% less than what Lane paid three years earlier.
At the time the 3100 Oak office building was being offered for sale, the economic woes unleashed by the coronavirus were in full swing.
Plenty of uncertainty haunted the commercial real estate landscape regarding when workers might return to their offices. Suburban Bay Area office markets such as those in the 680 Corridor were battered by vacancies.
In November 2021, a Ridge Capital Partners affiliate paid $9.5 million for the Walnut Creek office building. That represented a 38.1% slump in the value of the building over a four-year stretch.
“COVID has had a huge impact on the office market in the 680 Corridor,” Weil said. “The vacancy rate in the Pleasant Hill BART station is 30%.”
Office vacancy woes are widespread in these sections of Contra Costa County and eastern Alameda County.
Vacancy rates for offices in the Walnut Creek, Pleasant Hill and Concord areas average around 25%, estimated Edward Del Beccaro, executive vice president and regional manager with TRI Commercial Real Estate Services.
“There is a systemic suburban office vacancy,” Del Beccaro said. “Employees who were working in back-office spaces for finance, insurance, and real estate companies have migrated to Sacramento and out of state. The spaces that were designed for them in the suburbs are now becoming vacant.”
In 2017, when Lane Partners bought Station Plaza, the office building was 94% occupied or 6% vacant. Now it’s roughly 55% occupied or 45% empty.
While the results for Station Plaza forced a loss on Lane Partners, the developer has enjoyed plenty of success over the years.
Among the Lane Partner deals in recent years:
— In downtown Oakland in 2014, Lane Partners bought what would eventually become Uptown Station, paying $25 million. In 2015, Lane sold the building to Uber for $123.5 million.
— In north San Jose in 2017, Lane paid $225.5 million …read more
Source:: The Mercury News – Entertainment