Sale of former Chevron building reflects tough office market, shrinking oil footprint

The sale last month of an upscale office building in southwest Bakersfield for less than half its previous sale price speaks to the dual challenge of tough conditions in commercial real estate and continuing consolidation in the local oil industry.

Property records show local investors paid Chevron USA Inc. a little more than $9.7 million for the three-story building at 9500 Ming Ave. Twelve years earlier, Chevron bought the property for $22 million. It went for almost $41 million in 2009, four years after it was built.

Now, as the new owners at Capitol Reef Properties look to lease out the vacant building, they are likely to benefit from what people in the business say are gradually improving conditions that are not nearly as difficult as bigger cities have seen since the pandemic cleared out many office properties.

Even so, the 72,000-square-foot building called University Centre stands at the heart of one of the highest-vacancy submarkets in Bakersfield. Owing largely to the emptiness of the former State Farm office complex nearby, the area had a vacancy rate of more than 33% a year ago — at that time, more than seven times that of northwest Bakersfield.

The broker who represented the buyers and the seller in last month's sale, Executive Vice President Jeffrey Andrew at Cushman & Wakefield, called the property a long-term investment that has already attracted significant interest from potential tenants.

He said by email Friday it's a well-located property with strong signage and great parking that could suit medical or regular office tenants. To sweeten the deal, Capitol Reef has offered to help tenants pay for office remodeling work, Andrew added.

Bakersfield's office market is expected to improve this year, he noted, and people are willing to invest in good class A office properties.

"There's always a flight to quality," Andrew wrote.

Oil companies have long had an outsize impact on the city's real estate market. University Centre is a special case: The twin office building immediately to the west is occupied by local oil producer California Resources Corp. West of that stands the headquarters of fellow producer Aera Energy LLC, which CRC bought last year.

While Chevron had no comment to offer Friday afternoon, it told The Californian in October 2022 that it was looking to sell property in the area as part of an effort to maximize its space at field offices around the region.

In August of last year, the company announced a plan to move its corporate headquarters from San Ramon to Houston, even as it said its business plan for oil production in California remained consistent. Some observers interpreted the disclosure as a sign of the industry's frustration with California's ongoing phase-out of in-state oil production.