Kaiser Could Shrink Oakland Headquarters by More Than Half

Kaiser Permanente is ripping away at its roots in Downtown Oakland.

The locally based health care giant has shrunk its office headquarters by a third, and could shed more offices at the Ordway Building at 1 Kaiser Plaza, near Lake Merritt, the San Francisco Business Times reported, citing regulatory filings.

Kaiser has three leases at its hub inside the Ordway, totaling 366,800 square feet. The property is owned by Los Angeles-based CIM Group. Pending lease options could whittle it down to 153,000 square feet, a 58 percent chop.

In July, Kaiser exercised an early termination option on one of those leases for 130,100 square feet, shrinking the company’s hub to 236,700 square feet.

CIM had notified its lender of the upcoming downsizing, expected to severely weaken the building’s cash flow. That sent the $97.1 million loan on the property into special servicing in October for anticipated downsizing, suggesting Kaiser’s footprint is expected to contract further.

Kaiser’s other two leases include one for 153,000 square feet, set to expire next year. The firm executed a letter of intent with CIM last month to extend the lease through February 2027.

Its third lease for 83,700 square feet is scheduled to expire in 2027. Filings with the Securities and Exchange Commission show Kaiser can terminate the lease with a breakup fee if it gives 15 months notice.

If Kaiser dumps the lease, it could occupy as little as 153,000 square feet through February 2027. The filings do not say what Kaiser might do when that lease expires.

Loan servicer data obtained last month by the Business Times showed Kaiser planned to significantly downsize its space at 1 Kaiser Plaza, though it wasn’t clear when or by how much.

“The Ordway building at 1 Kaiser Plaza in Oakland continues to serve as Kaiser Permanente’s national headquarters,” an unidentified Kaiser spokesperson told the newspaper. “Nothing has changed.”

Last year, Kaiser announced it would pull 1,200 workers from its Downtown headquarters and move them to offices in Pleasonton. The city’s largest employer also sold two Oakland office properties at 2000 Broadway and 1950 Franklin Street, where it retains 45,000 square feet.

It still occupies 24,000 square feet at 1438 Webster Street and 17,000 square feet at 1200 Clay Street. It also owns a 785,000-square-foot building at 1800 Harrison Street.

In 2020, Kaiser jettisoned plans for a $900 million headquarters on Telegraph Avenue in what would have been the city’s biggest commercial project.

Rising crime in Oakland has been a major issue, with Kaiser warning workers to “stay in their buildings for lunch and work, in response to street robberies of workers who went out to grab something to eat.”

This year, Kaiser joined Clorox, PG&E and Blue Shield to rustle up $10 million to bolster security near their offices with escorts for employees and employee safety training.

Office vacancy in Oakland’s central business district hit 33 percent in the third quarter, according to CBRE. A broad shift to remote work has left offices empty, with many government employees staying home, leaving sidewalks devoid of foot traffic.

— Dana Bartholomew