Economy: Global Headwinds
The East Bay, consisting of Alameda and Contra Costa counties, continued to add jobs over the past year, bringing regional employment to 1.2 million and the unemployment rate down to 4.4%, compared with 4.2% nationally. Industrial users across the United States have faced a series of headwinds, from elevated interest rates and supply chain concerns to uncertainty around trade policy and soaring fuel costs. In the East Bay Oakland market, these factors have weighed heavily on many traditional users. However, the past year has also recorded a significant uptick in demand from a growing base of technology and advanced manufacturing tenants that are expanding beyond Silicon Valley and up the I-880 corridor.
Supply: Demand Uneven
The East Bay Oakland industrial market closed the third quarter with a vacancy rate of 8.4%, up 60 basis points (bps) from the prior quarter and 120 bps year-over-year (YOY). Net absorption for the quarter was negative 967,979 square feet (sf), the largest single-quarter occupancy loss in over two years, bringing the year-to-date (YTD) total to negative 2.0 million square feet (msf). Vacancy in the market continued to diverge by geography, with the southern end of the I-880 corridor outperforming the greater region. Fremont and Newark ended the quarter with vacancy rates of 4.3% and 4.5%, down roughly 170 and 130 bps YOY, and have recorded a combined 359,486 sf of positive absorption YTD. By contrast, vacancy has risen between 200 and 320 bps YOY in Hayward (11.6%), San Leandro (10.0%) and Oakland (9.3%), which together recorded an occupancy loss of 1.2 msf this quarter. The overall region continued to grapple with rising sublease space, up 50.7% YOY to 3.3 msf, accounting for nearly a quarter of all vacancy in the market. Sublease space has long been a vulnerability for the East Bay, but the source of it has recently reversed. Two years ago, it came from technology and R&D users exposed to swings in venture funding, whereas today it is concentrated in warehouse product, as 3PL, distribution and other traditional industrial users battle elevated fuel costs and supply chain difficulties. Not only has this weighed on sublease space, but on the warehouse product type as a whole. Warehouse vacancy reached 11.4%, up 280 bps YOY, while manufacturing vacancy has declined to 5.4%. Large block spaces, those over 100,000 sf, reversed gains made in the prior quarter and are up 11.1% YOY. That said, demand has proven softest for mid-size vacancies. Vacancies 25,000-50,000 sf are up 33.3% YOY, from 66 to 88 spaces, and spaces 50,000-100,000 sf are up 29.0%.
Demand: Tech Tenants Drive Growth
The East Bay Oakland industrial market recorded 3.3 msf of gross leasing activity in the third quarter, up 3.1% from the prior quarter but down 25.1% YOY against an exceptionally strong third quarter in 2025. The southern end of the I-880 corridor continued to capture an outsized share of activity, as Fremont and Newark accounted for 37.2% of gross leasing with approximately 20% of the market’s inventory. The largest lease of the quarter was signed by GoFo for 224,154 sf at 6015 Giant Road in Richmond. This marks another win for the region’s northernmost submarket where YTD leasing has already surpassed each of the prior three full years. Other notable leases included MiTAC’s three-building, 210,795-sf lease at Clarion’s new Campus @ Bayside development and Quanta’s two new leases for 203,414 sf and 198,768 sf, all three of which were signed in Fremont or Newark. Demand at the southern end of the corridor is beginning to outpace its supply of quality space. Fremont and Newark have just three vacancies over 100,000 sf between them, and Fremont’s construction pipeline is nearly fully pre-leased, which suggests the technology and advanced manufacturing users driving demand will increasingly need to look north. Tenants are also becoming more selective about the spaces themselves, seeking above-standard power and other features that will help direct demand toward the best positioned inventory across the full East Bay.
Pricing: Rents Diverge on Quality
The average asking rental rate for East Bay industrial closed the third quarter at $1.26 per square foot (psf) on a monthly triple net basis, up $0.04 psf from the prior quarter but down $0.05 psf YOY. The quarterly increase reflected the mix of space on the market more than broad rent growth, as newly available buildings in Fremont and Hayward hit the market with asking rates of $1.95 to $2.25 psf, while rates were little changed in Oakland and fell in Richmond. The delta in pricing between the two ends of the corridor remains wide, with Fremont closing the quarter at $1.71 psf compared with $1.18 psf in Oakland and $1.13 psf in San Leandro. The quality of space is becoming increasingly important, with spaces that meet the needs of advanced manufacturers able to push pricing, regardless of geography, while older-generation, traditional industrial space has seen rates fall.
Capital Markets: Investors Drive Activity
Sales activity maintained its momentum, with significant demand for East Bay industrial real estate. The largest transaction of the quarter was Wistron Corporation’s $120.0 million purchase of three buildings, totaling 374,730 sf, on Warm Springs Boulevard in Fremont from Link Logistics for $320 psf. This large user purchase stands out among the quarter’s top transactions, which were dominated by investors. Strong leasing from technology and advanced manufacturing users has renewed investor focus on the East Bay, and the breadth of buyers pursuing deals, even as vacancy has risen, demonstrates continued confidence in the market’s long-term demand drivers.
