By Brian Anderson
Valley Times

July 8, 2001

OAKLAND -- For decades, Oakland has been the hole in the doughnut, as city leaders here readily admit.

Major corporations, retailers and eateries have played an economic game of leapfrog between the big-city draw of San Francisco and the deep customer and worker pools in the suburbs of Walnut Creek, the Tri-Valley and points eastward.

Shoppers, diners and entertainment-seekers, similarly, have breezed through the East Bay's largest city, bypassing boarded-up downtown storefronts and too few opportunities to blow the latest paycheck. San Francisco with its stages and screens, bars and bright lights has long left Oakland in a financial shadow.

"Everything else around was being built and developed and Oakland was, especially downtown, very empty," said Oakland City Councilwoman Jane Brunner, who has lived in the city for more than 30 years.

But buoyed by a politically connected and powerful mayor, dipping crime rates and a somewhat diminished yet once-monstrous economic wave, the tide has turned in Oakland. Businesses and people are charging back to the city and bringing with them a nervous excitement about and a belief in a place many consider the next urban hot spot.

"I think that part of the excitement is that (Mayor Jerry Brown) has really highlighted the region a lot," said Stacia Hill Levenfeld, economic development manager for the Oakland Metropolitan Chamber of Commerce. "The people who have been here a long time are so excited to see the city changing."

New faces

Hard evidence of the city's increasing popularity came most recently with the release of federal census figures. Oakland's population grew more than 7 percent since 1990 to nearly 400,000, making it California's eighth-largest city.

The increase came as a surprise to demographers, who had predicted a sizable drop in the population. Oakland has long been a city on the outs in perception and, from one year to the next, in population.

Like other major urban areas, such as Cincinnati, Pittsburgh, Pa., and St. Louis, Oakland's residents and businesses were expected to continue a decades-old flight to the fresh stucco walls and manicured lawns of suburban subdivisions and strip malls.

The city, however, sits in a pole position just a few miles from the most expensive place in the country. San Francisco, whose many occupants have branded Oakland from one generation to the next as a vast municipal nothingness, is spitting people across the Bay on quests for affordability.

"Oakland has always been a poor stepchild of San Francisco," said Dana Goodell, president of Homefinders, which has helped people locate housing in the East Bay for more than 30 years. "But about 75 percent of the people coming to Oakland now are coming from San Francisco. There are all kinds of young people moving to where lots of people have spurned."

Specifically, east and West Oakland have been targets as newfound housing havens. Two- and three-bedroom homes in those neighborhoods, which have long been predominantly black and Latino strongholds, sell for a fraction of similar places in San Francisco or even other parts of Oakland.

That has led to complaints from affordable housing and neighborhood advocates that longtime residents are being forced out as the city's vacancy rate hovers near 1 percent. Rents are going up -- more than 35 percent in the past year, by one estimate -- and poor people are more and more becoming victims of progress, activists argue.

Sean Heron, executive director of the East Bay Housing Organization in Oakland, agreed that housing demand is eclipsing supply, but said construction of new apartments and condominiums downtown could have little effect in the long run.

Brown's 10K Initiative, a bold attempt to lure 10,000 new residents to the 6,000 units being built downtown, focuses on higher income earners, Heron said. If a percentage of those new units are not earmarked for the poor, rent increases in the area will continue to force people out, he said.

"We all understand that the goal of the 10K plan is really to build the sales tax base in Oakland and we support that," he said. "But most of the folks who are going to be working in those businesses that generate sales tax revenue are going to be low-wage workers and folks who really cannot compete in the housing market."

New spaces

Like housing costs, commercial space prices have climbed as businesses flee San Francisco, which was recently named the fourth-most expensive city in the world when it comes to office space, according to real estate watchdog Cushman and Wakefield.

About 300 companies have moved their offices to Oakland in the past year, according to a city tally, gobbling up space about as quickly as it went on the market.

"It's suddenly much more economical than San Francisco to build here," said Robert Lyons, the former chief negotiator for the Community and Economic Development Agency, who stepped down at the end of last year. "Even if San Francisco slowed down, there is so much catching up to do."

All indications are that the economy is cooling off, slowly freeing up office space in San Francisco and Oakland and knocking down their price tags in the process. Rents for second-tier spaces have dipped more than 11 percent since the end of last year, Cushman and Wakefield reported recently.

That is creating some nervous investors, who might begin holding off on project funding until there is greater stability, said John Protopappas, president of Madison Park Real Estate Investment Trust in Oakland.

"What really concerns me is the cost of construction," Protopappas said. "Given the fact that construction costs are still quite high, will that stop some developers from building and some banks from lending? I think it's more likely that the banks would slow down their lending."

But that doesn't mean Oakland's pie-in-the-sky prospects are going to plummet, he added. Analysts view Oakland's relatively affordable environs as a sizable draw for San Francisco dwellers and expect the city to continue to grow.

New places

What Oakland needs, city leaders admit, are big-name retailers to draw cash-in-hand shoppers. That has happened slowly as Oakland picked up economic steam in the past two years, luring most recently a Gap clothing store downtown.

Already dotting the city and filling day-to-day shopping needs are fragmented districts similar in appearance to Pleasanton's downtown and, on a somewhat smaller scale, Walnut Creek's Main Street. There are quaint and functional shops in the Montclair section of town, bars and restaurants in the Rockridge district, and movie houses, coffee shops and dry cleaners on Grand Avenue near Lake Merritt.

Still, there is no central shopping district in Oakland. On any given weekend, pigeons outnumber downtown shoppers. The aisles of a chain drug store, Sears and a handful of specialty clothing stores on Broadway have yet to stop the crowds from hitching it to San Francisco Shopping Centre or the department stores of Union Square.

Retailers are reluctant, Councilwoman Brunner said, to move to spots in Oakland that appear deserted. It's a Catch-22 as retailers refuse to open stores if there are too few people downtown and shoppers decline to go there because there are not enough stores.

"Residents tell me that they have to go to either San Francisco or Walnut Creek to do their shopping," Brunner said. "Oakland loses a lot of revenue when that happens."

Restaurants, bars, theaters and other entertainment spots also are sparse compared to San Francisco's offerings. They exist, but seem more hidden in profile and location than the flashy, in-your-face fun spots across the Bay.

But that, too, is changing. Slowly yet regularly, new venues are opening. Brews nightclub near Lake Merritt has been packing in partyers since late last year, while young hipsters cram into Radio downtown or Ben-N-Nick's in Rockridge.

"If you come to Oakland on a Saturday night, there's not much to do here," said Lyons. "Come back in five years."