Technology

For much of the technology boom, Oakland’s office market has been curiously sluggish, even as rents and occupancies in nearby San Francisco rocketed.

Finally, the bounty of the tech sector is spilling over across the bay.

Uber Technologies Inc. late last month announced it was buying a 330,000 square foot former department store in downtown Oakland for $124 million. While its ambitions are far larger in San Francisco—it is developing a new building there—it plans to have up to 3,000 employees in the Oakland location, more than the 2,000 it has in the Bay Area today.

More broadly, the Oakland market has lost its lethargy and is kicking into gear, largely fueled by smaller companies escaping San Francisco’s high rents.

Employers have moved into more than 600,000 square feet of additional space in Oakland’s central business district in the past 12 months, bringing the vacancy rate down to 5.8% from 10.9%, according to brokerage Cushman & Wakefield. Rent growth is picking up, and developers are gearing up to build in what they think is a market finally hitting its stride.

“It has been a long time coming,” said Daniel Harvey, a broker at CBRE who advises technology companies on their real estate.

The apparent embrace of Oakland as an acceptable venue by San Francisco companies illustrates the rapidly expanding geography of tech within the Bay Area, where space is at a premium and development is a lengthy endeavor. After first having filed up downtown and much of the gritty mid-Market neighborhood by City Hall, tech companies recently have been signing deals with developers for space in Mission Bay, a sterile-feeling neighborhood far from subways that once was meant to be a hub of scientific research.

Meanwhile, real-estate professionals expect tech giants in the prime cities of Silicon Valley to push further south as they expand, following the lead of Apple Inc., which has been buying property around San Jose.

Downtown Oakland long has proved a bridge too far, despite being just a 12-minute ride on the subway from San Francisco. Office rents illustrate the tepid demand. While San Francisco rents citywide increased 113% to $66 a square foot since the end of 2009, Oakland and surrounding cities grew just 17.5% to $30.13, according to Cushman & Wakefield.

Its also-ran status owes to an array of factors. It is far away from venture capitalists in Silicon Valley, has a reputation for higher crime, and can present a frustrating commute for workers in San Francisco.

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Source: Tech Firms Spy New Bay Area Frontier: Oakland

Write to Eliot Brown at eliot.brown@wsj.com

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