Why Uber made a U-turn en route to Oakland (Video)

Uber's decision to buy instead of leasing office space in Oakland was a questionable move from the start. News that Uber Technologies Inc. plans to sell its Oakland office property has upended its previously announced commitment and employee relocation to the city. Uber tempered that claim Friday, saying it could consider opening an Oakland office in the future, a company spokesperson told the Business Times. For now, the sales flyer that brokers are circulating is clear: The company wants to unload Uptown Station, a 380,000 square-foot office and retail development. Uber bought the former Sears department store in 2015 for $123.5 million. The deal at the time was seen as a coup for Oakland in landing a mega Bay Area tech employer. Some real estate insiders, however, questioned why the company decided to purchase the building instead of leasing the space from Lane Partners, which had already started a $40 million rehab. You can see more about that in a video about the deal we produced at the time. Lane more than doubled its money with its sale to Uber. The developer paid $25 million for the building in 2014 and told the Business Times a few months later it already had tenants interested in taking the entire building. "I look forward to working with the lucky buyer who hopefully will share Oakland's values of diversity, inclusion and equity," said Oakland Mayor Libby Schaff on Friday in response to news of the possible sale. The decision of whether to buy or lease is a tough call for any company, but fast-growing companies tend to put their capital into their business versus locking it down in real estate. Even Salesforce (NYSE: CRM), an established San Francisco software maker, turned away from building out and owning a huge campus in Mission Bay. After dropping $278 million on land, the company switched gears and leased numerous buildings in SoMa to create an “urban campus.” The company plans to move into its namesake tower, developed by Boston Properties and Hines, at First and Mission streets next year. The possible sale of Uptown Station means Uber can move the asset and development costs off its books, which could put it in a better financial position. That was a key motivator for exploring the sale, spokesperson MoMo Zhou told the Business Times. The company is private and eventually wants to file for an initial public offering. Oakland wasn't the only location where Uber bought rather than leased. It took a 45 percent equity stake earlier this year in two under-construction towers next to the Golden State Warriors' new arena in Mission Bay. It also owns a share in two buildings being developed for its use nearby by Alexandria Real Estate Equities. Uber plans to consolidate its San Francisco workforce at the Mission Bay locations by 2019, while vacating offices at three locations on Market Street. As far as Oakland is concerned, Uber could decide to lease space in the city later or possibly leaseback space from an eventual buyer of Uptown Station. Join the conversation: Follow @SFBusinessTimes on Twitter, "Like" us on Facebook and sign up for our free email newsletters. Blanca Torres covers real estate and economic development for the San Francisco Business Times. 100 Biggest VC Recipients of 2016 Ranked by 2016 disclosed round total Business name 2016 disclosed round total Uber Technologies Inc. $3.7 billion Lyft Inc. $1 billion Airbnb Inc. $555.46 million View This List Related Content Uber buys stake in Mission Bay Warriors arena office project Uber's downsized plans for Oakland expansion hurt, but just a little Community groups push for local hiring at Uber Oakland HQ A timeline of Uber's bumpy ride SFBT Structures Ep 2: Oakland's building boom Home of the Day Sponsor Listing Extraordinary Gated home with World-Class Views of Mount Tam, Ross Valley, and the Bay See All Homes of the Day Industries Commercial Real Estate Topics Retail Development Automotive CRE Brokerages CRE Developers Housing Market