Friday, February 26, 2016

Kaiser 501 J Street Conversion

Rendering of Kaiser Permanent's plans to remodel building at 501 J Street

The former Sacramento Corporate Center at 501 J Street is schedule to finish conversion this fall into a Kaiser Permanente medical offices and outpatient center. The building was purchased in December 2014 for $40 million after the previous owner was a victim of the last real estate downturn. The six-story 191,238SF building was built in 1983 and includes 500-parking spaces.

The former Sacramento Corporate Center built in 1983 at 501 J Street

Tuesday, February 09, 2016

Federal Funding for Streetcar Project

Federal funding has been offered to Sacramento’s downtown streetcar project of $75 million if Sacramento can also contribute an equal amount for an estimated $150 million project according to the Sacramento Bee. An additional $20 million will also be needed if light rail is moved off K Street onto H Street because the combination of the two would clutter K Street. 
Proposed 3.3 mile trolley would run from West Sacramento City Hall 
to 19th Street in midtown Sacramento.

The next step is to ask property owners along and neat the planned line this spring to vote to tax themselves to help pay for $30 million in construction costs. Last year residents who lived within three blocks of the proposed line in Sacramento rejected the financing plan but this spring another vote is expected as details and timing are still being worked out.

The city of West Sacramento is expected to kick in $25 million from a voter-approved tax measure. The city of Sacramento has agreed to add $7 million, and Sacramento County is expected to contribute $3 million. Proponents say they hope to win $10 million from the state in cap-and-trade funds. If Sacramento lines up the funding, construction would start in 2017 or 2018.

Proposed 3.3 mile trolley would run from West Sacramento City Hall
to 19th Street in midtown Sacramento

Thursday, February 04, 2016

301 Capitol Mall Tower Proposal

A few words I have read to describe the proposed CIM/CalPRES 30-story tower at 3rd & Capitol Mall… boring, gross, fugly, and not attractive at all. I have also read positive comments but they seem to be in the minority. I think its design is mundane which is typical with the state influence. Thankfully these are only conceptual drawings. CIM has said that no tenants have signed on, no price tag has been given and no permits or entitlements have been started. This is all an effort to get free publicly, something they have done nearly every year for the last several years but this time they have pretty pictures.

Proposed tower at 301 Capitol Mall by CIM/CalPERS looking west

Maybe this was a rushed effort to show me that there was a proposal in response to my post about it a few weeks ago? Probably not J Even though nothing thus far shows this will even happen, the developer has said it could break ground as early as 2018.

CIM plans for the site include a single 420-foot tower, 1.1 million square feet of space in the structure with 550,000 square feet of total office space, 100 apartment on the upper most floors and creative space and retail on the lower floors. It appears to be built to accommodate the states requirement of large open floor plates. Several weeks ago the Board of Equalization hinted it might relocate to this tower from its current headquarter on N Street, since then they have said they now prefer to move to low and mid-rise buildings instead of a tower. 

Proposed tower at 301 Capitol Mall by CIM/CalPERS looking east

This proposal like the Vanir Tower on J Street are still in the very early stages of development. This proposal will now be competing for tenants against the Vanir Tower to pre-lease. Banks under State/Federal law require that before monies can be lent to build an office building, 50% needs to be pre-leased. Vanir Tower needs to line up about 200,000SF and this tower needs 400,000SF. Occasionally developers will spend their own money to build high-rises like 500 Capitol Mall did and no pre-leasing is required. The Vanir Tower has not started the entitlement process or applied for any permits with the city. This indicates to me that after proposing the tower 15 months ago they have not pre-leased the minimum square footage to move forward. All these proposals emerging right now seem eerily similar to what Sacramento experienced in 2007 before the market collapsed and all but a few were built.

This proposal is far less appealing than I hoped for, but it not usual when the states involved. This site is at the foot of our city's grand entrance as you cross the Tower Bridge on Capitol Mall and deserved something much, much more that this current trendy design which is more awkward than anything else.

Current condition of the proposed CIM/CalPERS tower site

Sources: Sactown Magazine & SacBee

Monday, February 01, 2016

Market Report Q4 Sacramento

Colliers-International Q4 2015 Research & Forecast Report

Locally, 2015 office market ended positively. Colliers-International stated that the Central Business District absorbed 61,156SF of both class A & B space. The overall vacancy rate fell 90 basis points in Q4, from 16.7% to 15.8%. Downtown vacancy decreased slightly to 14.8% in Q4, due mostly to new occupancy in Class A properties. Asking rental rates increased 8 cents, an increase of approximately 3.3% quarter over quarter. Investment volume reached a peak in the 4 quarter with $247.3 million.

The new construction outlook shows no significant spec office developments under construction. Even though rents have shown some growth, they are still not at a level that justifies any new spec development in Sacramento. Colliers-International believes in 2016 the new Downtown Entertainment and Sports Center will remain the big driver. Interest in the ESC as well as growth in Government and the improvement of existing businesses will continue to drive tenant demand Downtown.

What I have observed and stated before, nearly all new construction in the CBD has received subsidies which has been the case for nearly ten years. Although trends are moving upward and rents are rising, they’re not high enough to bring construction cranes according to a local managing & leasing professional.

When it comes to economic growth, the US economy barely grew in the final three months of 2015 as manufacturing sputtered and consumer spending cooled.

Expansion in the world’s most important economy (USA) slowed to an annualized pace of 0.7 per cent in the fourth quarter, sharply down from 2 per cent rate in prior period.

Hang on… the ground might be shifting again and not in a good way.