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Oakland 2.0

November 12, 2018 | By John Cumbelich

Prior to World War II, Oakland was one of the major retailing markets in the West. In an era when the department store was the king of retail, serving as the ultimate validation of a retail marketplace, downtown Oakland was home to R.H. Macy’s, H.C. Capwell’s, Sears & Roebuck, I. Magnin & Co, Joseph Magnin, Kahn Brothers and others. Like San Francisco’s Union Square or the Miracle Mile of Wilshire Boulevard in Los Angeles, Oakland’s Broadway became an essential location for every major west coast retailer. This dynamic drove property values higher and attracted scores of small to mid-sized retail brands, as well as theatres, restaurants, banks and office buildings.

The dramatic changes in the post-war era, including the rise of the automobile, the growth of suburbs and the advent of the regional mall, wrought havoc on downtowns across the land, and markets reacted or evolved with varied levels of success. Perhaps no market was as unsuccessful as Oakland in adapting to these changes. The market experienced both the exodus of every one of the department store anchors that formed its’ retail backbone, and a paucity of any lasting or successful new retail to take its place. Absent a menu of competitive retail centers, Oakland became a city of pocketed retail streets and districts, each with a unique offering and vibe.

The bad news for Oakland wasn’t just in retail. Schools, wages and employment all sank, and crime levels soared, while the city’s identity went through radical changes in ethnicity, income levels, educational attainment and other demographic metrics. This was the Oakland that I first encountered professionally some thirty years ago.

Despite its hard luck, Oakland had and still has some unmistakable advantages. First, its in the geographic center of the Bay Area, the 6th largest metro area in the country. The weather and the cost of living are both far superior to San Francisco. Oakland is the western terminus of the transcontinental railroad and home to the busiest shipping port in the northwest. The affluent Oakland hills communities of Piedmont, Montclair and Rockridge are home to millionaires and billionaires alike, and one of the world’s leading research institutions, the University of California at Berkeley, is right next door.

Yet as retail became vastly more formulaic and homogenized in the 60’s, 70’s and 80’s, expanding retail and restaurant brands built their growth on the surging wave of mall expansion and suburban shopping centers anchored by high-copy anchors like K Mart, Wal Mart and Target. But with no major new retail centers offering that proven vehicle for a retailer to access its’ market, wave after wave of expanding retailers skipped over Oakland, instead dotting the map with surrounding stores in nearby markets. A generation of Oaklanders were thus trained to leave town when a new suit, a washer & dryer or a bedroom set was on the shopping list.

It’s no exaggeration to say that the failure of Oakland to reinvent its retail-self in the post-war years was a critical reason that leafy Walnut Creek, a town of only 60,000 at the time and some 15 miles east, became the alternate destination for brands like Macy’s & Nordstrom, and later Neiman Marcus and Tiffany & Co, when they determined how best to capture the 2,000,000 + population of the East Bay marketplace.

For me, Oakland’s rock-bottom moment came as I was preparing an East Bay site tour for a national retailer in the late 90’s. In a pre-tour call with the firm’s VP to discuss the proposed itinerary, I rattled off suggested sites in Walnut Creek, Pleasanton, San Leandro, Oakland and Berkeley.

“Take Oakland off the list” my client advised.

“Why”

“Oakland is a no-fly-zone.”

His words have been etched into my memory ever since. He continued, “…we’ll never get a site in Oakland, California approved through our real estate committee.” The sentiment of this firm was not unique.

Perception had become reality for this and countless other users – brands that had the opportunity to tap into a densely populated and dramatically underserved trade area – brands that had the potential give as much to the community in jobs, legitimacy in the world of retail, and pride, as they would take in sales success.

But then, finally, something happened. Things got so bad, that they actually got good. The historic Great Recession simultaneously destroyed the myth of the regional mall’s invincibility, and exposed the sprawling suburbs’ penury of density, daytime population, transit and resilience.

Resilience? Did someone say resilience? Well if Oakland developed one virtue over the past 60 years, it was resilience. This happens when your NFL franchise leaves…twice. The Great Recession’s validation of the virtues of core-market fundamentals made Oakland a poster-child for what employers, lenders, investors, office & retail developers, and best of all retailers and restaurants, were looking for.

A canny plan to densify the Downtown and Uptown sub-markets, linked together via Broadway, with 10,000 urban residential units, aspired to spark a renaissance through more foot traffic, more neighborhoods, more strollers, more dog-walkers, more shoppers and more diners. Preparation met opportunity when the Great Recession re-set national real estate priorities around resilient, durable core markets. Alert to this population surge, best in class brands like Whole Foods and Sprouts opened stores, cool breweries and tap rooms like Drake’s and The Trappist appeared, and an epicurean’s dream food-scene exploded.

And unlike many of its peer communities, Oakland doesn’t have the costly, thorny and politically charged question of how best to re-purpose its’ dead regional mall – since it doesn’t have one. Its retail infrastructure, built on heavily trafficked retail streets and self-sustaining retail districts today looks prescient, knitting together retailing and dining brands with transit, daytime and residential populations. Today, occupancy levels on Oakland’s historic retail streets and districts averages 98.61% (read report) – numbers that beat virtually every market in North America – or anywhere else on the planet.

As I write this, Oakland is a city of cranes. Over a dozen giant construction cranes now mark the cityscape, from Jack London Square on the bay all the way Uptown, along and around the historic Broadway spine. Office towers, residential towers, mixed-use projects, state of the art medical centers and transit-oriented developments are simultaneously creating a new Oakland in real time.

And what about those beautiful old department store buildings? The Capwell’s building (later Sears) was sold to UBER, and is now being beautifully reimagined as a stunning first-class office space, close to transit, shopping, dining and the swelling Uptown neighborhood. Its tenants won’t feel too pioneering as other new economy tech-firms like Pandora and Ask have already joined Blue Bottle Coffee, Cost Plus World Market and Clorox in making Oakland their headquarters.

Just like its pre-WWII self, Oakland is once again a short-list destination for investors, lenders, REITs, retailers, restaurants and residents. Once labelled a no-fly-zone, Oakland today is a target rich trade area with a growing inventory of new, high quality retail assets that both retailers and dining brands are prioritizing.  Oakland’s long winter is finally over.