California Governor Jerry Brown, a former mayor of Oakland, once observed that because the city is just seven minutes across San Francisco Bay via the Bay Area Rapid Transit (BART) system, Oakland is closer to San Francisco than is most of San Francisco.

With its larger neighbor experiencing phenomenal job growth—25 percent from 1990 to 2014, according to the California Center for Jobs and the Economy, primarily due to the boom in the technology sector—Oakland is benefiting from San Francisco’s prosperity, says Rachel Flynn, Oakland director of planning and building. Oakland’s proximity to San Francisco—and 50 percent lower rents—have made it a hot bedroom community for San Francisco workers and an alternative location for small businesses and startups.

But Oakland is not without challenges. A 2015 report by the Federal Bureau of Investigation placed Oakland second on the list of most dangerous cities in the nation, with 1,977 violent crimes per 100,000 people, and second in the state, after neighboring Emeryville, in overall crime.

Still, with growing demand for housing and office space and 30 percent lower building costs than San Francisco, Oakland is seeing a tremendous amount of construction activity, despite the high crime rate. More than 1,000 residences—nearly one-third of which are affordable housing—are expected to be completed by the end of this year, and more than 11,000 more units are in the pipeline. In addition, commercial, mixed-use, and hotel projects, as well as entire multiuse districts, are underway or in the planning stage.

“Renovation of old and historic buildings is the play in [downtown] Oakland,” says Flynn. Among the projects she cites is Lane Partners’ planned $25 million overhaul of the old Sears store in uptown to provide creative office space. The project, which began construction this August and is scheduled for completion in 2017, offers edgy architecture that is attractive to technology and solar energy firms, she notes. This project is “a great hope for Oakland,” she says, because the developer plans to ask higher rents than those for other buildings in the market, which could boost overall office rents. Oakland office rents are about $33 per square foot ($355 per sq m), according to a recent report from Jones Lang LaSalle (JLL).

“This was a unique opportunity to find 300,000 square feet [28,000 sq m] of creative office space atop a BART station,” says Lane Partners principal Drew Haydel. The former Sears property has an old, unused door onto the BART concourse that will provide direct access to the transit system from the project’s 50,000-square-foot (4,600 sq m) retail component.

Lane has been developing tech space throughout the Bay Area and Silicon Valley for many years, so Oakland was a natural direction for expansion, Haydel says. The city has a large stock of historic buildings to convert to creative office space, he notes. “With pressure on San Francisco office space, it’s natural that [tech] companies will start moving to Oakland.”

The JLL report concurs with Haydel’s prediction, noting that creative tenants in Oakland favor historic Class B buildings over trophy/Class A assets. This has generated demand for second-tier properties and increased Class B office rents by nearly 22 percent over the past year. With strong demand for Class A space continuing to tighten the market, the report pointed out, robust leasing activity in Class B space is expected to follow.

In acknowledgment of its proximity to the BART station, the Sears store is being repositioned as Uptown Station. It is being targeted for Silver certification or higher under the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) program; it will have such sustainable features as natural daylighting, energy-efficient building systems, and clean indoor-air technology. Windows that were covered with shotcrete after the 1989 earthquake will be restored, bringing life to the facade. A 56,000-square-foot (5,000 sq m) light well will be cut through the center of the structure and a new structural system installed around it. All old building systems are being replaced with energy-efficient, low-maintenance systems, and the basement will be converted to provide 115 parking spaces.

New Hospitality

Other major ground-up projects planned in downtown Oakland include two hotels plus a 23-story, 600,000-square-foot (56,000 sq m) office tower, which is being developed by a partnership of Shorenstein Properties and MetLife Real Estate Investments.

The hotels are a welcome addition to the downtown market: the current stock of 5,000 rooms is not enough for a city the size of Oakland with a busy convention schedule and a growing tourist industry, Flynn notes. She points out that the Lonely Planet travel guide ranks Oakland eighth among its “Best U.S. Places to Visit in 2015.”

“Until the last 12 months, hotels didn’t pencil out; the margins just haven’t been there,” says Alison Best, president and chief executive officer of Visit Oakland, the city’s tourism and convention bureau. “That is shifting now, and a new hotel with a couple hundred rooms is breaking ground within the next six to eight months in downtown.”

As of this summer, Oakland hotel occupancy averaged 81 percent for the previous 12 months, Best says; the average daily rate was up 12.3 percent, and revenue per available room was up 15 percent. Tourism adds $20 million annually to the city’s general fund through occupancy tax, she notes, and tourists spend more than $1.2 billion annually, generating more than 13,000 jobs.

Visit Oakland is positioning the city as a great regional hub—with transportation by air, BART, or train—that offers less expensive accommodations than those in San Francisco, Best says. “People can save money by staying in Oakland, using it as a base for exploring the Bay Area,” she says.

Oakland’s edgy architecture and lower residential rents are attracting tech workers from both San Francisco and Silicon Valley, with companies like Google and Facebook sending buses equipped with wi-fi to pick up their employees who live in Oakland, notes Oakland-based developer John Protopappas, president and chief executive officer of Madison Park Financial Corporation (MPFC), which specializes in repositioning industrial structures as residential properties.

MPFC was the first residential developer to get projects underway when the financial market returned, in 2013 completing the final phase of the Bakery Lofts, which added 79 apartments to 94 other units at the historic Remar industrial bakery. The first two phases of the project, which straddles the Oakland/Emeryville border, were completed during the previous real estate cycle.

The company also completed Lampwork Lofts in 2014, a historic rehabilitation of a shuttered General Electric light plant in the West Oakland neighborhood to provide 92 chic, edgy apartments. MPFC restored the structure, which is certified by the National Park Service as a national landmark, distinguished as the first West Coast industrial facility to employ women.

“Our focus is to follow the railroad tracks,” Protopappas says. “We convert industrial, warehouse, and distribution facilities to lofts.” His company now owns more than 800 rental units in West

Oakland, downtown, and East Oakland by the waterfront on both sides of Jack London Square. An additional 380 units are under development.

In another historic conversion, Oakland-based Signature Development recently completed the Hive, a mixed-use project that transformed a city block of historic structures near the 19th Street BART station to office and retail uses, plus 105 residential units. Located in the Uptown market popular with millennials, the complex includes the Impact Hub Oakland, a 15,000-square-foot (1,400 sq m) shared creative office space used by tech and other business startups, as well as a restaurant with outdoor seating, a microbrewery, a bakery, other retail and office tenants, plus a large gathering space for events.

“This is a very successful project, and we like to follow success with success,” says Signature president Michael Ghielmetti. Signature is developing another residential mixed-use project next to the Hive that will include 70,000 square feet (6,500 sq m) of retail space and 138 market-rate condominiums.

His company also is expanding development into the surrounding blocks, with a project at 23rd and Valley streets that is slated for 100,000 square feet (9,300 sq m) of retail and office space and 450 apartment units. “The BART line is here. It’s the heart of things,” Ghielmetti notes.

The project is in the Broadway-Valdez corridor, also known as Auto Row for its many car dealerships. Planners have slated this one-mile (1.6 km) stretch between Grand Avenue and Highway 580, served by the 19th Street BART station, for large retail and residential projects and have secured environmental approvals for sites vacated by auto dealers. The area’s specific plan anticipates 3.7 million square feet (343,000 sq m) of new development over the next 25 years, including 1,800 residential units, plus creation of 4,500 jobs.

Also in the Broadway-Valdez area, Los Angeles–based Wood Partners is planning a 200-unit mixed-use project with 30,000 square feet (2,800 sq m) of retail space, and Oakland’s Lakeshore Partners is proposing a 24-story residential tower, with 223 residential units and 7,800 square feet (725 sq m) of commercial space on the ground level.

In addition, a seven-story mixed-use project is planned by a partnership of New York City–based Blackstone—the nation’s largest landlord—and Los Angeles–based CityView, a developer and investment management firm headed by Henry Cisneros, former U.S. secretary of Housing and Urban Development. The development will include 435 market-rate rental units and 24,000 square feet (2,200 sq m) of retail space north of the 19th Street BART station.

Rapid Lease-ups

Oakland’s plethora of residential development is being driven by demand, with projects fully leased by the time they are completed. But the need for more housing has made Oakland one of the easier places in the Bay Area to get projects done.

Oakland’s population grew from 390,865 in 2010 to 406,253 in 2015, according to the U.S. Census Bureau, and is expected to reach 435,000 by 2020. “Quality of life here is very good,” says Flynn. “Demand for housing is insatiable; there’s no way we can meet that [future] demand.”

To encourage more residential and commercial real estate development, the city’s planning department created area plans around mass transit nodes along Broadway, a main street that bisects the city, notes Calvin Gladney, managing partner of Mosaic Urban Partners, a public/private partnership strategist, and real estate developer based in Washington, D.C. Gladney served as adviser to the former Oakland mayor and the city’s redevelopment agency before local redevelopment agencies throughout California were dissolved in 2012.

The city identified 3,000 vacant lots for potential development along the Broadway corridor and obtained California Environmental Quality Act (CEQA) approvals for these sites, cutting the approval process from 18 months to just four. Infill projects in five districts along Broadway receive “over-the-counter” approval: there is no discretionary review, parking minimum or maximum, or need for CEQA appeals.

“This is pretty remarkable,” comments Flynn. “In San Francisco, you won’t even get an appointment for a few months. At the end of the day, we’re really about traffic.” This focus on traffic is why the city’s specific plans call for development around mass transit, she says. “Our eight BART stations are an enormous asset for us. This is a multibillion-dollar investment that really paid off.”

Although Oakland fast-tracks approvals for most infill projects, Protopappas notes that the entitlement process depends on the type of project, and Oakland can be just as tough on zoning variances as San Francisco is. Oakland also has adopted the Sustainable Community Development Initiative and Green Building Ordinance, which require developers to comply with local green building policies and requirements, as well as the state’s CALGreen building code.

In 2013, the city council established the Oakland Affordable Housing Trust Fund with $1.8 million from the general fund, and each year it sets aside 25 percent of “boomerang” funds—the city’s portion of former redevelopment agency property tax increment revenues—to provide an ongoing source of funding for affordable housing projects. Boomerang funds are so called because they now flow from the city to the state and back to be redistributed among county, school district, and other local taxing entities.

Impact Fees?

Unlike most major California cities, Oakland has no inclusionary/affordable housing ordinance. However, political pressure from affordable housing advocates to extract more benefits from market-rate development has caused city leaders to consider this concept. The city has hired the Hausrath Economics Group, an Oakland-based consulting firm, to study the economic effects and viability of adding impact fees to new development in the city to fund both affordable housing and public works, such as parks, street improvements, and fire stations.

Flynn, however, is concerned about how new impact fees might affect the city’s recovery. She notes that the turnaround in Oakland’s development is boosting the city’s economy and speeding the recovery of values from the real estate bust. ”Property values in downtown were clobbered [during the recession]—in some cases a 50 percent loss,” says Flynn. “Oakland has made a rapid recovery, with values back at [their 2006] peak right now.”

Jim Ellis, managing principal at Ellis Partners, who was selected by the Oakland Chamber of Commerce to provide the development community’s input on the impact-fee issue, says developers generally support the impact fees because they create a level playing field. Developers are more concerned about uncertainty of rules governing residential development, he says. “But the city has to be very careful of how fees are determined and how they come into play or it could interrupt recovery at a very early stage if it’s not handled correctly,” Ellis warns.

First Stop Out

In West Oakland, neighborhood resistance to development may have helped push gentrification to the forefront of the discussion. The site of the BART stop nearest to San Francisco, West Oakland is an important redevelopment area, but was once a rough-and-tumble neighborhood cut off from the rest of the city when the freeway came through.

The city responded to gentrification pushback with subsidies to help existing homeowners improve their properties. It also partnered with San Francisco–based affordable housing developer Bridge Housing to build MacArthur Station, a transit-oriented master-planned development that at buildout in 2021 will have 624 new housing units on a 7.8-acre (3.2 ha) site, of which 516 will be market rate and 108 affordable. The project also envisions 43,500 square feet (4,000 sq m) of commercial space and neighborhood retail services and a 5,000-square-foot (460 sq m) community space. The project, which is being built on BART-owned parking lots, includes a 478-space parking garage for BART patrons, retail customers, and residential guests.

“We want people to stay in place and [we want] new development,” says Flynn. “We’re creating all types of housing. This is a multi-income area.” Bridge Housing also recently completed Mandela Gateway, a 168-unit affordable apartment complex across the street from the BART station with more than 20,000 square feet (1,900 sq m) of retail space.

“With prices going through the roof [in San Francisco], Oakland becomes the next pressure point,” says Cynthia Parker, Bridge Housing president and chief executive officer. “So the first BART stop near San Francisco is the natural progression for people moving out of San Francisco.”

But growing demand is pushing up rents in Oakland and exacerbating the affordable-housing problem. “Two years ago, [average] rents were $2 per square foot [$22 per sq m] in Oakland, and now [they’re] in the mid-$3-per-square-foot range [$32 per sq m],” Parker says. As rents escalate, so does the need for affordable housing, she notes. Bridge, which is Oakland’s biggest producer of affordable housing, received 9,000 applications for two projects coming online this fall with a total of 158 units. “I have never seen this kind of wait list before,” she says.

Residents are not the only ones affected by gentrification, Gladney points out. “Most opposition to gentrification focuses on residents being pushed out, but another chilling aspect is [that] local businesses, like neighborhood markets, also find themselves on the wrong side of gentrification,” he says.

The city’s specific plan for West Oakland anticipates construction of nearly 5,000 residential units, 3.85 million square feet (358,000 sq m) of new business and industrial space, and 800,000 square feet (74,000 sq m) of office and retail space—enough to accommodate 22,000 jobs.

The MacArthur BART station handles 11,000 passengers daily, with trains stopping every 90 seconds, notes Oakland developer Rick Holliday, founder and principal of Holliday Development and cofounder and chairman of the board of Bridge Housing. While developer interest is recent, Holliday realized the value of the West Oakland area in 2000 when he purchased 29 acres (11.7 ha) surrounding the area’s historic 1912 Transcontinental Railroad Station for $15 million and repositioned an old industrial facility as the Pacific Cannery Lofts, a 163-unit for-sale housing development completed in 2008.

Bridge Housing, the owner of the train station, which was abandoned after the 1989 earthquake, and the land it sits on, is working with a local developer experienced in historic preservation to restore the structure as a community destination. Parker envisions activating the main hall as a local gathering space and adding to the premises a commercial bakery and urban farm that grows and sells flowers. California housing developer City Ventures has begun development of 171 for-sale residential units next door.

Holliday is also building a five-story, mixed-use project nearby with 235 apartments and 15,000 square feet (1,400 sq m) of ground-floor commercial space. Similar to the Hive, the project’s commercial space will serve as a shared startup incubator for small manufacturing and social-media entrepreneurs.

Isolated from the city’s prosperity since the 1980s, East Oakland is the city’s most blighted neighborhood and faces even greater challenges than West Oakland, with vacant storefronts, high crime rates, and a lack of neighborhood retail services. But the city has developed a plan for a new bus rapid transit service to run along International Boulevard, providing opportunities for developing nearby “transit villages.”

The plan also proposes land use and design changes to support transformation of International Boulevard into a vibrant corridor that connects adjacent neighborhoods; plans are to improve walkability, safety, bicycle access, and transit use, and promote development of mixed-income housing near transit. The city is working with residents, public officials, nonprofit housing developers, affordable housing advocates, and other stakeholders on developing and implementing these plans.

Locally based Sunfield Development recently announced plans to build a 27,000-square-foot (2,500 sq m) neighborhood shopping center, anchored by a Walgreens drugstore, in East Oakland.

Also, Irvine, California–based Related California, a division of New York City’s Related Cos., has partnered with Oakland’s Acts Full Gospel Church to build a 59-unit affordable apartment complex on International Boulevard; ground breaking is slated for the end of this year.

Some market-rate housing is also planned. Golden Stone Investment, an Oakland-based developer, is in the planning process to build an eight-story, mixed-use project with 37 market-rate condos and nearly 7,000 square feet (650 sq m) of retail space on the northern edge of East Oakland near Lake Merritt.

However, pressure from neighborhood activists caused the city council in July to reverse plans for a 300-unit luxury residential tower on a one-acre (0.4 ha), city-owned site near the Golden Stone project in order to comply with California’s Surplus Land Act, which requires state and city governments to first offer property no longer necessary for their own use to affordable-housing developers.

Master-Planned Developments

Oakland also has four master-planned, multiuse developments in the works, three on the waterfront and one in the hills overlooking San Francisco Bay.

One of these, the Ellis-owned nine-block area known as Jack London Square, is located on the waterfront near the Port of Oakland. Phase I of the redevelopment has been completed and is now occupied by curated destination retail, restaurant, and entertainment businesses. Environmental cleanup is underway for Phase II, which will add $400 million in commercial development, including 200,000 square feet (19,000 sq m) of office and retail space, a 248-room hotel, and two high-rise residential towers with a total of 600 units.

Also on the waterfront, Signature Development is developing Brooklyn Basin on a 65-acre (26 ha) industrial site on the Oakland Estuary in partnership with Zarsion America, the U.S. division of Beijing-based Zarsion Holdings Group. The $1.5 billion, 3.4 million-square-foot (316,000 sq m) master-planned community, on which ground was broken in March 2014, will provide 3,100 residences, 32 acres (13 ha) of parks and open space, restored wetlands, a new marina, and 200,000 square feet (19,000 sq m) of retail and other commercial uses at buildout.

Coliseum District

Located along San Leandro Bay, the proposed Coliseum City, a sports-oriented mixed-use district anchored by three sports venues, is conceived as a boon to Oakland’s blossoming tourism industry, a major employment center with an estimated 21,000 new jobs, and an aid in revitalization of the nearby East Oakland neighborhood.

“It would provide the live/work/play environment that tech companies desire,” says Coliseum City developer Floyd Kephart, principal at New City Development and founder and chairman of the San Diego–based Renaissance Companies. He notes that the plan calls for 2 million square feet (186,000 sq m) of creative office space with the fiber-optics infrastructure needed to support emerging technologies, 1 million square feet (93,000 sq m) of other office uses, and 1.7 million square feet (158,000 sq m) of light-industrial and logistics space.

It also would provide two hotels with 800 rooms, up to 450,000 square feet (42,000 sq m) of destination retail space and restaurants, 150,000 square feet (14,000 sq m) of public space, and 4,000 residential units. The development would be anchored by a new football stadium for the National Football League’s Oakland Raiders, a new ballpark for Major League Baseball’s Oakland Athletics, and an arena for the National Basketball Association’s Golden State Warriors.

The project is viewed as one of the biggest transit-oriented development opportunities in the state, Kephart notes: the 600-acre (243 ha) site—120 acres (49 ha) of which is owned by the city—provides a transportation hub that includes the Coliseum BART station, the BART Airport Connector, and easy access to freeways.

Whereas Kephart is confident that the city wants to retain its sports teams, Flynn says the city is willing only to pay for infrastructure to accommodate sports facilities, not for the facilities themselves. She notes that sports facilities do not generate enough revenue to pay their own way, a hard lesson Oakland learned from experience: the city is still paying off the $100 million debt incurred for the Raiders’ old O.co Stadium—commonly known as the Oakland Coliseum—which opened in 1966.

Kephart submitted a proposal for financing options for the development by the city’s June 21, 2015, deadline, but as of midsummer, the city had not released the details of that proposal. The project could be developed without city and county financing through use of a combination of debt and private equity, Kephart says, but he contends that the best approach involves city and county financial support using public financial tools. These tools include a new state public financing mechanism created last year by Assembly Bill 638, which allows cities to establish enhanced infrastructure financing districts to fund public and private redevelopment projects without raising taxes.

In the Oakland hills, Irvine, California–based SunCal is developing a 187-acre (76 ha) master-planned community in the Oak Knoll neighborhood on a site formerly occupied by a U.S. Army base and military hospital. The developer plans to offer parcels to builders of single-family homes and create 70,000 square feet (6,500 sq m) of retail space.

The site’s topography varies from flat to hills that offer expansive views of the bay and the San Francisco skyline, says David Soyka, SunCal vice president of public affairs. Amenities include restoration of a creek that had been covered, four miles (6.4 km) of hiking trails, and 75 acres (30 ha) of parks and public spaces that will be open to the entire Oak Knoll community.

Because the military hospital was important to the community’s identity—it served prisoners of war returning from Vietnam—a veterans memorial will be erected in a park overlooking the site, Soyka says.

Though Oakland’s proximity to San Francisco sparked its recent building renaissance, it has always had the makings of a great city. “The quality of life is very good here,” says Flynn. “It’s got access to transit, it’s a great community, so it’s a natural for tech companies,” notes Haydel. Adds Best: “Oakland has great outdoor weather, architecture, food, music, great people. This is an exciting time for us.”

Patricia Kirk is a writer living in the Los Angeles area.