OAKLAND — Kaiser Permanente is warning it plans to slash its downtown Oakland headquarters footprint, an ominous decision that deals a fresh blow to a reeling Bay Area office market.
The disclosure was contained in a Fitch Ratings report about multiple commercial real estate properties, with a special focus on the Oakland tower at 1 Kaiser Plaza.
The 28-story Ordway Building totals 537,800 square feet and at 404 feet is the tallest Bay Area skyscraper outside of San Francisco.
Kaiser Foundation Health Plan is the primary tenant in the building. Kaiser occupies an estimated 69.4% of the building, the Fitch Ratings report states. That would equate to a Kaiser occupancy totaling 373,200 square feet.
CIM Group, through an affiliate, owns the building, which the real estate firm bought in 2008 for $82.1 million, documents on file in Alameda County show. In January 2024, the building’s estimated value was $161 million, the County Assessor’s Office reports.
Now, however, the office tower, perched on a prominent spot next to Lake Merritt in downtown Oakland, faces an uncertain fate due to the prospect that Kaiser will drastically downsize its presence in the building.
The current loan on the building totals $97.1 million, according to a closely watched Trepp Reports property blog that was posted in 2019.
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That loan, deemed to be in distress, has been transferred to a special loan servicer, according to the Fitch Ratings report, which was issued in September. Special loan servicing is a sign that the borrower might become delinquent on a mortgage.
Making matters worse, Kaiser has notified its landlord that it intends to shrink its footprint in the Ordway Building, Fitch reported.
“According to the servicer, Kaiser has exercised an option to downsize by 130,085 square feet, which would result in a decline of the building occupancy to 59%,” Fitch Ratings reported.
The 130,100 square feet is about one-fourth of the office space in the entire tower.
Kaiser this year is orchestrating downsizing efforts on multiple fronts in downtown Oakland. These efforts include lease terminations and property sales in the East Bay city.
In recent months, Kaiser sold two office properties in downtown Oakland:
— In August 2024, Kaiser Foundation Health Plan sold an office building at 2000 Broadway to BART for the transit agency’s police headquarters. The purchase price was $25.5 million.
— In September 2024, Kaiser Foundation Health Plan sold an office building and associated garage to an affiliate headed up by residential developer Behring Cos. for $14.4 million.
Five years ago, Kaiser had a different mindset about its presence in downtown Oakland.
With much fanfare, Kaiser unveiled plans in 2019 for an eye-catching new headquarters complex in Oakland’s Uptown district. The $900 million, 29-story tower in the Uptown district would have served as Kaiser’s new headquarters.
The healthcare organization was planning to consolidate all of its administrative office operations into a single tower that would have accommodated 7,200 workers.
The economic maladies unleashed by the coronavirus eventually prompted Kaiser to scuttle its plans fro the new skyscraper.
