PG&E will relocate to Oakland after more than 100 years in San Francisco

PG&E Corp. plans to sell its San Francisco headquarters and move to Oakland in the coming years, a cost-saving effort that will see California’s largest utility leave the city where it has been based for more than a century.

The company announced Monday that it will begin relocating from downtown San Francisco to 300 Lakeside Drive by Lake Merritt in 2022. PG&E said it would “launch a competitive market process” to sell its San Francisco office complex, which includes 77 Beale St. and 245 Market St., after it emerges from bankruptcy protection.

PG&E intends to ask state regulators at the California Public Utilities Commission for permission to return its net gain from the San Francisco office sale back to customers, the company said. The move is designed to help the company save money on real estate costs, though PG&E did not immediately provide an estimate on those savings.

Still, it’s a major step for the company and subsidiary Pacific Gas and Electric Co., which has been based in San Francisco since its creation 115 years ago. The company’s roots in the city stretch back even further, to the founding of San Francisco Gas Co. in 1852.

The transition comes as PG&E seeks to wrap up its costly bankruptcy case this year. The utility and its parent company filed for bankruptcy in January 2019, facing billions of dollars in liabilities from devastating wildfires that the company’s power lines caused.

“Our new Oakland headquarters will be significantly more cost-effective, is better suited to the needs of our business, and is a critical part of fulfilling our commitment to operate in a fiscally responsible way that will enable us to achieve our operational and safety goals,” said Bill Smith, the incoming interim CEO of PG&E Corp., in a company statement.

BART is currently headquartered at 300 Lakeside, the former Kaiser Center where PG&E plans to move. But the transit agency will depart after its lease expires next year for nearby 2150 Webster St. as it seeks to cut its own real estate costs. The move will free up 14 floors that PG&E could occupy, though the company did not specify whether it was taking over the BART space. Other tenants include engineering giant AECOM and Kaiser Permanente.

PG&E will follow numerous other companies that have migrated from San Francisco to Oakland, where office rents are about a third less expensive, at around $55 per square foot a year. The utility’s former neighbor, Blue Shield of California, left 50 Beale St. for a new Oakland tower last year. In 2016, the Sierra Club left San Francisco after 124 years for Oakland.

Andy Vesey, the CEO of PG&E’s utility subsidiary, said in the statement that the company was proud of its long history in San Francisco but described Oakland as “a perfect fit” and “a thriving hub of industry and innovation in our state.”

“We expect the sale of our San Francisco headquarters will unlock value in a notoriously tight real estate market, no doubt bringing a dynamic new tenant to downtown,” Vesey said.

Mark Toney, executive director of The Utility Reform Network consumer group, was pleased to see PG&E say it would pass along the financial benefit of its San Francisco office sale. He hopes that the company does the same for any recurring savings it achieves through lower office costs.

“We view this as a positive move, but we need to make sure that the operational savings get passed on, year in and year out,” Toney said.

PG&E will conduct its move in phases and expects to stay in the S.F. offices until 2023. The company also intends to consolidate its current East Bay satellite offices in San Ramon and Concord into the new Oakland headquarters starting in 2025.

PG&E will lease an unspecified amount of real estate from TMG Partners, which reportedly plans to buy 300 Lakeside from developer Swig Co. and Rockpoint Group. PG&E said that TMG will renovate the 1960 building before PG&E moves, starting in 2022.

The building lets PG&E “optimize its footprint, phase into the new space in a compact timeline in a location that is easily accessible to a majority of their employees — and understanding Oakland’s continued regional desirability for its central location, transit access, and great community,” said Matt Field, president of TMG Partners, in a statement.

PG&E had begun studying the sale of its headquarters in early 2018, but efforts were delayed during the devastating Camp Fire that fall, which led to the utility’s bankruptcy.

In the new East Bay headquarters, PG&E said it is envisioning a “better and more efficient use of space” with more flexibility around layout and density in light of the COVID-19 pandemic. The company also believes the move will allow for better commutes to its employees, many of whom live in the East Bay already.

“PG&E has been a steadfast partner for decades to the Oakland Chamber as well as many other civic and community organizations. Their commitment to the Town is deep, and we applaud their decision to go all in for Oakland,” said Barbara Leslie, CEO of the Oakland Metropolitan Chamber of Commerce, in a statement.

PG&E’s current main office buildings have more than 1 million square feet of office space in the heart of the Financial District. With recent office real estate sales surpassing $1,000 per square foot, the properties could be worth more than $1 billion. However, the coronavirus epidemic has chilled the real estate sales market and made future demand for office space uncertain.