Downtown Berkeley housing construction has stalled, creating empty, blighted lots

People walk past boarded up businesses along the top of Center Street, one of the busiest blocks in the city. Credit: Ximena Natera, Berkeleyside/CatchLight Local

The top of Center Street, in the heart of downtown Berkeley, was until recently the kind of bustling restaurant row that seemed to buzz at all hours. Streams of pedestrians making their way up the block from the BART station to the Cal campus were tempted by breakfast sandwiches in the morning and Persian stews at lunch, boba drinks in the afternoon and Cantonese noodle rolls for dinner.

Over the past two years, though, 10 of the block’s restaurants moved or shut down as developer Core Spaces pursued a plan to build a 26-story apartment building at the corner of Center and Oxford streets. The project promised a transformation — the tallest building in downtown Berkeley, with 456 new apartments and a new strip of commercial space.

But it’s not clear when that project will break ground, and in the meantime, the block is in limbo.

It’s of the most dramatic illustrations of a concerning trend for city and business leaders: While downtown Berkeley has broadly avoided the kind of economic calamity that threatened other city centers in the wake of the pandemic, several prominent sites that were cleared out in anticipation of new development are now sitting vacant and forlorn amid a construction slowdown.

Where downtown once buzzed with construction workers building hundreds of new apartments, today there is not a single housing project under construction in the city’s core. 

“The busiest block in the downtown — the gateway to the university — is now chain-link fence and boarded up,” said John Caner, CEO of the Downtown Berkeley Association. “The market turned, so it was really, really unfortunate timing.”

The now-emptied top of Center Street, seen in a 2021 photo, was home to a popular strip of restaurants. Credit: Kelly Sullivan

The business association estimates 17 projects planned for downtown Berkeley, which combined would bring more than 3,000 apartments, are on hold because of high interest rates and construction costs — factors that have slowed home building nationwide, and now face an even more uncertain future amid tariffs from the Trump Administration. 

When Berkeleyside reached out to the developers behind several of downtown’s biggest projects, we didn’t find any who were planning to break ground imminently. 

The neighborhood’s retail vacancy rate stood at 10.9% last year, according to the city’s official measure. But that doesn’t include empty spaces where new housing is planned, such as the top of Center Street, because they aren’t being marketed to tenants. Factor in storefronts eyed for redevelopment — and take out properties such as the downtown parking garage that are counted as occupied in the city’s total — and the vacancy rate soars to 28.2%, according to Caner. 

Berkeley has started trying to lure pop-ups and other temporary businesses into some of the empty storefronts, in hopes of breathing life into them and bringing more activity to the streets outside. 

Some parts of downtown are in even rougher shape than the boarded-up buildings on Center Street, however. A short walk away, a developer demolished half of a city block with plans to build an apartment complex along Harold Way in 2023, then couldn’t start construction. The site is now an “open pit,” in the words of downtown Councilmember Igor Tregub, where a tattered fabric screen on its chain-link fence does little to mask the construction debris and trash accumulating inside.

“There is a mismatch between the expectation and the current reality,” Tregub said.

When will major projects break ground?

A woman walks on Kittredge Street’s improvised sidewalk, next to a stalled housing project site in downtown Berkeley. Credit: Ximena Natera, Berkeleyside/CatchLight Local

For anyone who lived through the years-long battles over whether to allow high-rise apartments in downtown Berkeley, the relative ease with which developers have won approval to build three projects standing 25 or more stories tall is a testament to how much the city’s approach to housing has changed.

But it’s anyone’s guess when those projects might actually be built.

Core Spaces, the Chicago developer behind the Center Street complex, approved last September, declined Berkeleyside’s request to comment on when it plans to break ground or the current state of the property. Mark Rhoades, a development consultant who worked with Core Spaces on the project, dubbed “Hub Berkeley,” said the company might start construction by the end of this year or in 2026.

Rhoades is also part of the development team working to build a 28-story, 599-unit building that would occupy much of the 1900 block of Shattuck Avenue, above the McDonald’s at University Avenue. The group hopes to start construction in two to three years; the project was approved by Berkeley’s Zoning Adjustments Board last month but will go before the City Council later this year on an appeal.

More than a dozen businesses near the intersection of Oxford and Center streets, across the street from the Cal campus, are vacant and boarded up. Credit: Ximena Natera, Berkeleyside/CatchLight Local

Georgia student housing developer Landmark Properties got the green light two years ago to build a 25-story complex at Shattuck Avenue and Allston Way, but would not say when it plans to break ground on the project at what is now the vacant former site of a Walgreens. Sara Williams, a representative for the company, provided a statement that read in part, “We continue to monitor market conditions to determine the best time to proceed.”

But while developers have been hoping for better economic conditions for nearly three years, long-term interest rates have stayed stubbornly high and the tariffs imposed and threatened by the Trump Administration would further increase construction costs by making building materials that come from Canada, Mexico and China more expensive. Just the potential for tariffs was enough for some suppliers to start raising their prices.

“It’s just unsettling, and I think people are waiting to see whether things calm down a little bit,” longtime downtown developer Patrick Kennedy told Berkeleyside. “Until that uncertainty lifts, I think you’re going to see people waiting on the sidelines.”

Berkeley Planning Director Jordan Klein also noted the three largest projects planned for downtown all use expensive steel frames because of their size, where mid-rise apartment buildings can be built with cheaper wood construction over concrete podiums. That makes those projects more sensitive to interest rates and material costs.

A 28-story building is set replace the McDonald’s at the corner of University and Shattuck avenues. Credit: Ximena Natera, Berkeleyside/CatchLight Local

Falling rents make developers wary

Developers point to another factor limiting construction downtown — something they see as a problem but most other people don’t: rents are dropping.

Rhoades said leasing agents struggled to fill several new buildings with tenants when they opened last fall, leading them to cut asking rents and offer other concessions, after the surge of construction in recent years put a glut of new apartments on the market at the same time.

Meanwhile UC Berkeley is in the midst of its own building boom. Ahead of this school year, the university opened its 772-bed Anchor House dorm downtown and another 761 beds at the xučyun ruwway complex in Albany.

“That has had a huge impact on rents,” Rhoades said. “From a housing perspective, Berkeley is in the best shape it has been in in more than 50 years.”

Data from the real estate site Zillow show asking rents in Berkeley declined for five straight months through last summer and fall. Since 2022, the cost of what Zillow defines as typical rent — the average of the 35th to 65th percentile of asking rent prices — has grown by just $40 per year, or less than 1.5%, well below inflation.

Transfer students move into Helen Diller Anchor House, Cal’s new dorm in downtown Berkeley, in August 2024. Credit: Ximena Natera, Berkeleyside/CatchLight Local

The rental market for older and typically more affordable apartments has also softened significantly. Housing advocate Jeff Baker shared data with Berkeleyside that shows the median rent for new leases of one-bedroom, rent-controlled apartments was $2,295 during the third quarter of 2024, which covers the busy leasing season ahead of the new academic year. That’s down more than $300 from its peak in the third quarter of 2022, and up only $100 compared to the same quarter of 2018.

Rhoades said the developers building downtown’s biggest pending projects don’t want to flood the market again, and will likely build them one at a time over the next several years. 

“All of these projects are going to mete themselves out,” he said, based on the perception of supply and demand.

But there’s no sign UC is letting up on construction as it works toward a goal of adding 9,000 new student beds. Crews are building another 1,113-bed dorm at People’s Park, while the university hopes to break ground next year on a project with around 1,500 beds at the intersection of Bancroft Way and Fulton Street.

And enrollment at UC Berkeley — one of the main drivers of demand for housing in the city — has been nearly flat since 2021. That has left developers anxiously watching whether Cal will increase enrollment, and wondering if they may have found the limits of what has seemed like an insatiable demand for student housing.

Little sign of permanent slow-down

A construction pit has engulfed most of the Harold Way block since 2023, after a developer halted the construction of a planed housing project. Credit: Ximena Natera, Berkeleyside/CatchLight Local

Caner, the Downtown Berkeley Association CEO, predicted some developers may tweak their student-centric projects so they appeal to broader markets. Rhoades said his high-rise at Shattuck and University is aimed at young professionals, while Kennedy said he is working on a project at the former site of the deli Poulet that would cater to empty-nesters who no longer need their large homes, but still want to stay in Berkeley.

“Our demand isn’t just about the university,” Klein, the planning director, said at a panel last month on Berkeley’s housing market hosted by the commercial real estate news site BisNow. “There is great opportunity for housing that is not targeting the student market.”

Ultimately, there is little indication that the slow-down represents developers souring on downtown or Berkeley as a whole. 

Economic factors appeared to cause a dip in housing construction in 2023, when Berkeley issued building permits for 431 homes. That was down from 887 in 2022, which represented the most new housing permitted in the city in generations. But despite the sluggishness downtown, data released last week by the city’s Planning Department show construction rebounded across Berkeley in 2024, with 731 building permits issued.

The city approved plans for more than 2,000 homes last year and developers submitted applications to build more than 3,000, according to data from the Planning Department. And non-housing projects are proceeding downtown — at the top of University Avenue, Cal is building a life sciences hub that could bring more research and development jobs to the neighborhood.

Meanwhile Kennedy, who has been building projects in Berkeley since 1989, said the shift in local politics has made the city friendlier to new housing than he has ever seen.

“We’re not doing anything terribly big right now,” said Kennedy, whose company is building a 68-unit apartment building just north of downtown and a 39-unit affordable development to the west, as well as a 12-unit project along College Avenue. But, he said, “I’m very long-term bullish on Berkeley.”

City hoping to lure pop-ups to empty spaces

On the other side of the block from the Harold Way site in downtown Berkeley, nearly every storefront along Shattuck Avenue is empty. Credit: Ximena Natera, Berkeleyside/CatchLight Local

In the near term, the city faces the challenge of what to do when major spaces in the heart of its downtown could be vacant for years.

Berkeley officials are exploring how they might bring pop-up businesses into empty spaces such as the former Walgreens at Shattuck and Allston. The city’s Office of Economic Development recently hired a staff member who will work on efforts to fill vacancies and is studying what cities such as San Francisco have done to enliven empty storefronts.

“We recognize the importance of keeping these spaces vibrant and are committed to strategies that support both short-term activation and long-term economic growth,” the office’s director, Eleanor Hollander, wrote in an emailed statement.

But getting those spaces buzzing again could be easier said than done. Along with the challenge of finding a temporary tenant, the owners of several prime vacant sites downtown — including the Walgreens and the former restaurants along Center and Oxford streets — shut off the power to their properties in hopes crews would imminently break ground. It can take months for Pacific Gas and Electric Company to turn the power back on at a property, Caner said, and just as long to turn it off again whenever the project is ready to start construction.

And as for the pit along Harold Way, the city has even fewer options.

On top of the factors that have slowed development elsewhere downtown, the plan to build an eight-story complex with 187 apartments at that site has faced its own turmoil. The developer that won city approval for the plan, CA Ventures, has been sued by investors and contractors over other projects, and was threatened with eviction from its downtown Chicago headquarters, the real estate news site Propmodo reported. The company has since been acquired by a Canadian firm, QuadReal Property Group, which has re-launched its portfolio as Article Student Living.

“We remain committed to our site in Berkeley,” Carly Zapernick, the managing director of construction and development at Article Student Living, wrote in an email. “We continue to work alongside community stakeholders to create a positive environment for residents.”

Zapernick did not provide an estimate for when the project would begin construction, but said the company is seeking building permits from the city. 

Until that work begins, Zapernick said the company plans to replace the torn-up screen around the property with a new fence, and block the view of downtown’s most glaring stalled site with a mural.