Memo from City Manager to City Council regarding Report on Leasing at Alameda Point, October 20, 2015

Exhibits:

1. Map of Alameda Point Buildings

2. Powerpoint on Industrial Market from Cushman & Wakefield

3. City of Alameda Asset Management policy

File #: 2015-2132
Type: Regular Agenda Item
Body: City Council
On agenda: 10/20/2015
Title: Report on Leasing at Alameda Point (Base Reuse 819099)
Attachments: 1. Exhibit 1 - Map of Alameda Point Buildings, 2. Exhibit 2 - Powerpoint on Industrial Market from Cushman & Wakefield, 3. Exhibit 3 - City of Alameda Asset Management Policy

Report on Leasing at Alameda Point (Base Reuse 819099)

To: Honorable Mayor and Members of the City Council

From: Elizabeth D. Warmerdam, Interim City Manager

Re: Report on Leasing at Alameda Point

BACKGROUND

Alameda Point has had an active leasing program since 1996. For many years the leasing program was considered an “interim” program focused on short-term leases and interim uses. During this time, the City pursued master developers for the entire Alameda Point property, with the expectation that the developer would assume responsibility for leasing upon entering into a development agreement. As the City has taken a more “hands-on” and incremental approach to conveyance, planning and entitlement, and development of Alameda Point over the last five years, City staff has taken a more strategic approach to leasing. This includes targeting industries and uses that are:

• Consistent with the community’s long-term vision for Alameda Point that generate high-end and high-tech jobs;

• Amenities for all of Alameda Point and the City as a whole;

• A mechanism to attract visitors and create momentum and place-making benefits for new development opportunities.

As part of this more strategic approach, City staff has also recommended long-term leases and/or leases with options to purchase in certain parts of Alameda Point, such as the adaptive reuse area where the long-term preservation of historic buildings is a key consideration, and the tidelands maritime areas that have limited new development potential. Staff has been careful over the last five years to not enter into long-term leases or options to purchase within the Site A or Site B areas.

In sum, the approach to leasing by the City and its agents has shifted from an interim program to a key economic development strategy for attracting commercial uses and maximizing the value of all uses within the new development areas of Alameda Point. Our goal is to accommodate existing high profile and attractive individual tenants, such as Google, and clusters of industries, such as clean-tech, food and beverage manufacturing users and artisan makers, which will lay the groundwork for commercial expansion and attraction opportunities elsewhere on the Alameda Property, including in the Enterprise District.

Overall, the Alameda Point leasing program consists of 1.8 million square feet of commercially leased space for approximately 60 businesses and 1,000 employees and 68 existing residential units. This staff report is an update on recent leasing activity at Alameda Point. A map of the buildings and their numbers at Alameda Point is attached (Exhibit 1).

DISCUSSION

In 2013, the City issued a Request for Proposals for leasing and property management resulting in Cushman & Wakefield serving as the City’s leasing agent and PM Realty Group performing property management responsibilities. The pairing has resulted in the following executed leases:

• A lease renewal for Building 19, a new lease for Building 11 and an option to lease for Building 12, 400 and 400A with an arm of Google that focuses on clean energy technology;

• A new lease with Wrightspeed, an expanding clean-tech company;

• A new lease with Brix Beverage, an organic soda company;

• A new lease with Matson, a maritime logistics company;

• A new lease with Building 43 & Associates, a consortium of local wineries;

• A new lease with Universals Studios for the film “Steve Jobs;”

• A renewal expansion with Natel Energy, an expanding clean-tech company;

• A renewal with Power Engineering, a maritime construction contractor;

• A new lease with 707 West Tower Associates for a food and beverage incubator and specialty production facility, including ancillary on-site retail; and

• An active, short term, licensing program, which has expanded to include Google, Tesla, SF Muni, and Restoration Hardware.

While a cursory look at Alameda Point appears to show significant building availability and open space, much of the space is already leased or not easily occupied without significant investment. With the transfer of the property from the Navy to the City and the strong economy, Alameda Point has become a very desirable property for both interim and long term leases. Cushman & Wakefield reports that many tenants are migrating from the high rents of San Francisco to the East Bay with definite spillover potential for Alameda (Exhibit 2). Alameda Point has also benefitted from increasing rents and low vacancies in the Silicon Valley area by attracting Wrightspeed and Google. While office rates continue to climb, the industrial market, which largely describes Alameda Point reuse potential, has experienced rates that have climbed over twenty cents a square foot in less than two years.

The leasing strategy at Alameda Point has largely followed the direction of the City’s 2010 Asset Management Policy (Exhibit 3):

• Maintain/Help Grow Credit Tenants

• Attract Large Employers/High Sales Tax Generators

• Build on Industry Clusters

o Food & Beverage

o High/Clean Technology

o Maritime

o Creative Office

o Lab/Biotech

Most of the recently executed and pending leases are consistent with the policy, and as a result, most of the immediate available spaces are leased. Leasing efforts will now start to shift its focus towards:

1) Marketing more challenging buildings, such as the Bachelor’s Enlisted Quarters (BEQ) (i.e., Buildings 2, 3 and 4) and other buildings in the civic core of the historic district, which are historic, have been chronically vacant, and require significant investment;

2) Exploring strategic options to make available new building space by making limited investment, such as restoring electricity to spaces that are vacant because there are no electrical services; and

3) Creating new innovative leasable spaces, such as portables on vacant land and re-purposing former Navy structures (Quonset huts).

Again, staff will be strategic about entering into long-term leases and options to purchase to help ensure that these types of leases will not interfere with new development opportunities.

FINANCIAL IMPACT

There is no financial impact. This is for information only.

ENVIRONMENTAL REVIEW
This is for information only.

RECOMMENDATION

This report is submitted for information purposes only.

Respectfully submitted,

Jennifer Ott, Chief Operating Officer, Alameda Point

By,

Nanette Mocanu, Assistant Director, Community Development Department

Exhibits:

1. Map of Alameda Point Buildings

2. Powerpoint on Industrial Market from Cushman & Wakefield

3. City of Alameda Asset Management policy