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City Says Economic Downturn’s Impacts Lessened by Local Institutions

By Richard Brenneman
Thursday July 23, 2009 - 09:36:00 AM

While Berkeley suffers from the same impacts from a beleaguered economy as do other East Bay cities, the effects seem to be milder, says Michael Caplan. 

As the city’s economic development manager, Caplan keeps his pulse on the Berkeley economy, watching a range of factors, including retail and commercial vacancies and store openings and closings. 

The faltering economy has definitely had impacts here, he said Wednesday, 

“Upper Solano Avenue has been struggling,” he said. “They’re having a harder time” than downtown Berkeley. 

While the city center has lost one eatery in recent weeks—the Downtown Restaurant at 2102 Shattuck Ave.—Caplan said that a new restaurant has opened at the Shattuck Hotel, a new wine bar has started up across the street, and a lease has been signed for the long-vacant UC Theatre at 2036 University Ave. 

Overall though, Caplan said, “We probably have seen an increase in commercial vacancies. But I’m an optimist about downtown, much more so now.” 

Berkeley is faring much better than San Francisco, which Caplan said is struggling with large commercial vacancies, often where owners bought at the top of the market and haven’t been able to charge rents high enough to cover their mortgages. 

“The amount of the leases doesn’t cover their holding costs,” Caplan said. 

Pay cuts just implemented by the UC Board of Regents will probably give the local economy a further hit, he said, although Berkeley consumers are more likely to spend locally than residents of many other cities. 

“Still, even at City Hall, we see a lot more people bringing their lunches to work,” he said. “People are saving more, and that’s happening nationally.” 

Caplan said he’d been pleasantly surprised by the fourth-quarter sales tax figures for last year. “We were one of only three cities in Alameda County to show an increase, even if it was only one percent.” 

The City of Alameda was another gainer, boosted by the opening of a new shopping Center. Caplan said he didn’t know the reason for the spike in the third community, Union City. 

“With three large institutional employees, Berkeley is better off than many other cities, because employment tends to be more stable,” he said. The big three are the university and its associated national laboratory, Alta Bates Summit Medical Center and the city itself. 

“They’re not as susceptible to market forces,” he said.  

While the city keeps track of commercial vacancies, Caplan said he relies on Colliers International, a commercial brokerage, for data on office vacancies. “They’re in contact will all the property owners,” he said. 

While Colliers hasn’t released second quarter figures for 2009, first quarter figures actually showed a decline in vacancies for the first quarter over the final quarter of 2008 for downtown Berkeley, the rate dropping from 16.7 percent to 14.2 percent.  

In the same period, office vacancies in West Berkeley increased by only three-tenths of a percentage point, rising to 13 percent. 

By way of comparison, vacancies jumped a full three percentage points in Emeryville, from 12.3 percent to 15.3 percent. 

The highest vacancy rates were recorded at Marina Village in Alameda, with 30.2 percent, and at Oakland International Airport, with 24.3 percent. 

UC Berkeley added two city office buildings to its inventory in the same period, the Golden Bear at 1995 University Ave. in the first quarter and a six-story office building at 2850 Telegraph Ave. in April.  

West Berkeley is losing another tenant, the energy snack company Clif Bar, which announced this week that it would be moving its 180 employees to Emeryville. 



Recent reports have shined a spotlight on problems facing commercial and office building owners. 

The Sacramento Business Journal reported July 17 that office vacancies in that city have topped 20 percent, the highest since the CB Richard Ellis brokerage began tracking empty spaces there in 1989. 

Moody’s Investors Service reported Monday that national commercial real estate prices fell by 7.6 percent in May, and the Wall Street Journal reported on the same day that lenders may be taking write-offs of $30 million on commercial properties by year’s end.  

Vacancy rates at malls and strip malls are also edging up and rents are dropping, Reuters reported earlier this month, hitting records not seen since the dotcom bust.