United States -  Oakland

Overview:

The Oakland/East Bay hotel market is entwined geographically and economically with the bordering cities of Emeryville, Alameda, and Berkeley, and is strongly influenced by the trends in nearby San Francisco. Demand in the area is driven by several public and private institutions, including the headquarters of the University of California system and of Kaiser Permanente Healthcare, as well the University of California Berkeley campus, the Port of Oakland, and Oakland International Airport. Additionally, rideshare titan Uber will be expanding into Oakland in 2017, following the completion of a gut-renovation on a historic building previously occupied by Sears. The offices will accommodate 2,500 employees and boast 380,000 square feet of space. With locations proximate to San Francisco, East Bay hotels attract price-sensitive leisure and group demand seeking a Bay Area experience. The Oakland/East Bay hotel market also benefits from the technology and green energy industries.

All of these demand generators support a market that reached an occupancy peak of 79.5% and a record average rate of $131 in 2015. As the rest of the Bay Area’s hotel market surges, the Oakland/East Bay performance is anticipated to continue to strengthen, especially in terms of average rate. Improvements in the area’s hotel market performance have prompted developers to consider new projects and revive older plants. Both full- and select-service hotels are being planned in the area, most as part of larger commercial mixed-use developments. As there has been little new hotel inventory in recent years, these hotels are expected to further support the anticipated average rate increases in the market.

Oakland’s neighbor across the bay, San Francisco, experienced some new highs in hotel values in 2014 and 2015. Correspondingly, East Bay hotel values have also increased, but not to the level of those in San Francisco. Recent transactions in the East Bay range from the sale of limited-service hotels, most of which transacted for less than $100,000 per key, to the Courtyard by Marriott in Downtown Oakland in February 2016 ($270,000 per key, or $44,000,000) and the destination Claremont Resort & Spa, for more than $308,000 per key. With continued demand growth and average rate increases expected over the next few years, hotel values are anticipated to increase in tandem with stronger Bay Area markets, albeit at a more moderate price point.

* The HVI is an index, a statistical concept reflecting a measure of the difference in the magnitude of a group of related variables compared with a base period. As such, it is a measure of broad market trends, rather than a conclusion as to the specific value of any asset, and cannot be applied to an individual asset. A good comparison is the Consumer Price Index. While this index provides a reliable measure of the overall rate of inflation in a region, it does not indicate how the price of milk has changed at your grocery store. So how can the HVI be of use to an individual investor? Although the HVI cannot tell you what a particular hotel is worth, it does provide excellent big picture data, indicating which market areas are experiencing positive trends, and thus may present good investment opportunities. The HVI for the U.S. is a measure of the strength of the lodging industry as a whole and, specifically, the hospitality investment market. The HVI for the various identified markets can provide a basis to evaluate and compare different geographic regions. For more insight on the limitations and applicability of the HVI, please read the message on the HVI home page by clicking on the graphic at the top of this page.

Valuation Trends and Predictions:

Oakland United States
Previous Year +12% (1 of 71) +1% (49 of 71)
Growth in 2017 +1% (42 of 71) +2% (36 of 71)
Growth in next 3 years +7% (51 of 71) +10% (36 of 71)

Change In Value For Market:

Oakland RevPAR % Change

For more information, please contact:

Suzanne Mellen, MAI, CRE, FRICS, ISHC
smellen@hvs.com
  • +1 415 268-0351 (w)
  • +1 415 896-0868 (w)
Adam Lair, MAI
alair@hvs.com
  • +1 415 896-0868 (w)
  • +1 504 231-2651 (m)
Aaron Solaimani
asolaimani@hvs.com
  • +1 425 761-1699 (w)