Economy: Unsteady
The East Bay, consisting of Alameda and Contra Costa counties, recorded a gain of 3,000 jobs year-over-year (YOY), lowering the unemployment rate by 40 basis points (bps) to 4.4%. Throughout the East Bay, healthcare has been a driving force behind employment growth in the past year, but despite overall gains, the broader technology industry, previously a driver of occupancy growth, has faced softness and continues to weigh on office leasing. While nearby San Francisco has experienced an influx of leasing activity from AI companies, or those servicing them, that demand has yet to spill over to the East Bay office market in a meaningful way.
Supply and Demand: Leasing Rebound
The East Bay Walnut Creek office market closed the third quarter with a vacancy rate of 30.3%, down 20 bps from the prior quarter but still up 140 bps YOY. This drop in vacancy comes as the result of 40,651 square feet (sf) of net absorption. The market has now recorded occupancy gains for the past two quarters, following 12 consecutive quarters of negative net absorption dating back to the second quarter of 2023. Class A space, which for many quarters had been the leader in occupancy loss, was responsible for the majority of the positive absorption this quarter at 36,781 sf. Walnut Creek Pleasant Hill BART led all submarkets with a 62,275-sf gain in occupancy, while Walnut Creek Downtown faced the greatest loss with 26,955 sf of negative absorption as several new small spaces hit the market. The average time on market for office space continued to rise across all submarkets in the third quarter, to a marketwide average of 42.5 months as commodity space struggles with a lack of demand. While the region has made some gains in occupancy, it has become apparent that certain product may continue to wait for a broader surge in demand. Total leasing activity reached 272,997 sf, the highest level in over a year. Of this, 93% of leasing volume came from Class A office, including the 11 largest leases of the quarter. Over half of these leases were direct new deals, signifying sustained demand for the best office properties in the market. The largest lease of the quarter, and the year, was a renewal of 96,944 sf by AssetMark at 1655 Grant Street in Concord. Elsewhere in Concord, Regional Center of the East Bay renewed its lease of 40,027 sf and expanded into an additional 20,170 sf, for a total of 60,197 sf at 1320 Willow Pass Road. Concord led the region in leasing this quarter, largely thanks to these two deals, with 176,356 sf.
Pricing: Stable
The overall asking rate in the East Bay Walnut Creek closed the third quarter at $3.06 per square foot (psf) on a monthly full-service basis, level with the prior quarter and YOY. Rental rates reached their lowest point since 2019 in the third quarter of 2025, and have remained there since, aside from a $0.01 bump to $3.07 psf in the first quarter of this year. For the second consecutive quarter, Class A rates fell slightly while Class B rates rose by the same margin, sitting at $3.15 psf and $2.74 psf, respectively. Walnut Creek Pleasant Hill BART and Walnut Creek BART tied for the highest overall asking rate at $3.69 psf. Walnut Creek Downtown maintained the highest Class A asking rates in the region by a wide margin, at $5.35 psf. As tenants continue to place value on high-quality, well-located office space, Class A asking rates in specific submarkets could continue to rise despite the elevated vacancy. Walnut Creek Downtown Class A has seen a modest increase in vacancy YOY, yet at the same time rates have risen by $0.12 psf. Over the same period Walnut Creek BART Class A vacancy rose 160 bps, and rates went up by $0.15 psf. Walnut Creek Shadelands, with its older, less location-oriented inventory, remains the submarket with the lowest overall asking rate at $2.41 psf.
Sales: Activity Continues
The first half of the year saw several large sales and the third quarter followed suit with another major transaction. Synergy Petroleum Enterprises, Inc. purchased 1600 Riviera Avenue, a 128,090-sf Class A office property located in the Walnut Creek BART Area, from Eagle Canyon Capital. The buyer paid $14.5 million, or $113 psf, and plans to reposition and lease the property. In Walnut Creek Downtown, Cilker purchased the 21,200-sf 2099 Mount Diablo Boulevard for $7.7 million, or $362 psf, a strong price for a well-located, fully leased office building. As the leasing market is showing signs of heating up, there may be increased investor interest in the region through the end of 2026 and beyond.
