1215 O Street Office Building Construction

 California State Office Bldg. 1215 O Street Sacramento - 11-story mid-rise

The new building appears to be on the ninth floor of the eleven story mid-rise. The exterior glass wall looks interesting but we will not know for sure until it’s complete. This $274 million dollar structure is expected to be finished in early 2021.

Construction Milestones:
Eight floor concrete is complete
Walls and columns to the 9th floor are complete
Ninth floor decking and rebar is in progress
Masonry continues in the lower level
Drywall framing is in progress on the 1st floor
Mechanical, fire protection and electrical work is in progress in the lower level and on the 1st floor

Learn more here, here & here

California State Office Bldg. 1215 O Street Sacramento - 11-story mid-rise

California State Office Bldg. 1215 O Street Sacramento - 11-story mid-rise

California State Office Bldg. 1215 O Street Sacramento - 11-story mid-rise

California State Office Bldg. 1215 O Street Sacramento - 11-story mid-rise

California State Office Bldg. 1215 O Street Sacramento - 11-story mid-rise

Convention Center & Community Theater Renovation

Sacramento Convention Center Renovation

Demolition began last month on both the Convention Center and Community Center. The first phase includes expanded exhibit space, a new kitchen, additional meeting rooms, east lobby and a new west lobby in a 205,000 square-foot building. The project also includes an event plaza between the Center and the Community Center Theatre for convention functions or a community gathering place. The expansion of the Sacramento Convention Center is estimated to cost between $220 million and $240 million. The theater work will cost between $83 million and $88 million. Learn more here & here.

Sacramento Convention Center Renovation

Sacramento Convention Center Renovation

Sacramento Convention Center Renovation

Sacramento Convention Center Renovation

Sacramento Community Theater Renovation

Sacramento Community Theater Renovation

Hyatt Centric Hotel

With the tower crane now at the job site and the inside of the former Marshall hotel gutted, I can’t really tell what else has happen since I was here taking pictures in April. For a Friday it was really quite at the job site, they are probably doing foundation work.

Hyatt Centric Hotel Sacramento - 1122 7th Street

Hyatt Centric Hotel Sacramento - 1122 7th Street

Hyatt Centric Hotel Sacramento - 1122 7th Street

Hyatt Centric Hotel Sacramento - 1122 7th Street

Hyatt Centric Hotel Sacramento - 1122 7th Street

Hyatt Centric Hotel Sacramento rendering - 1122 7th Street

Hyatt Centric Hotel Sacramento rendering - 1122 7th Street

Colliers Sacramento Office Snapshot: Q3 2019

Some key takeaways from this Colliers Sacramento office report. Preliminary statistics show a strong office market throughout Sacramento with the lack of available supply and Class A space downtown. Downtown Class A vacancy rate is now 7.2%, which has been cut in half since 2015 and asking rates posted a record high at $3.26PSF, up 8.3% from Q3 2018. ColliersSacramento Office Snapshot: Q3 2019
http://colliers-sacramento.com/Marke...port_FINAL.pdf

New Developer Chosen for 301 Capitol Mall

CalPERS has changed things up and hired a Houston-based developer Hines Real Estate to take over the 301 Capitol Mall project. According to The Wall Street Journal, an outside consultant expressed concern about the former developer CIM performance. CIM failed to deliver as much as $41 million in rebates that were negotiated as part of the nine-year-old agreement.

The article also mentions that, with interest rates low, major public pension plans are under heightened pressure to seek out investments that will yield enough to cover benefits promised to firefighters, police officers, teachers and other public workers. “We’re committed to fulfilling our fiduciary duty to find the best investment path forward for this very important project,” Ms. Frost said.

RCLCo, a real-estate consultant for Calpers, also outlined problems with CIM Group in a performance review prepared for Calpers, the people said. The memo, which isn’t public, said that CIM’s efforts at developing properties in Calpers’ portfolio were slow.

Separately, a Calpers spokesman said that about $41 million, a previously unreported figure, remains to be paid by CIM Group to Calpers on a total $50 million in fee rebates promised under a 2010 agreement.

After reading this article in WSJ, it appears CIM’s ouster was because of a lack of performance. If the economy softens, I wonder what Hines will do?  Will Hines scrap the current proposed tower and build something unique for Capitol Mall. We don’t need to see another uninspiring tower like this last one.

301 Capitol Mall Future Unclear

CalPERS has ended its partnership with CIM to build Sacramento tallest high-rise. According to Chief Investment Officer, it is unclear if CalPERS still plans to build the office tower. Last year, the CalPERS investment committee approved the new $550 million project by a 10-3 vote. Three investment committee members raised concerns about the 34-story building following a negative opinion on the project from a CalPERS hired real estate consultant. In approving the project, the CalPERS investment committee and investment staff agreed that they would not proceed if the building was not at least 40% pre-leased and CalPERS was guaranteed a return of at least 5.8%.

301 Capitol Mall has seen three proposals for the site since 2005. The first was the twin 53-story condo/hotel that had millions of dollars in cost over runs. CalPERS stopped the funding of the project in 2007 losing an estimated $60 million dollars. Then in 2016 CalPERS with developer CIM Group proposed a poorly designed mixed-use high-rise which looked like three separated building stacked on top of each other. This design was shelved after much blow back from the public.

From what I understand, the asking rate for the proposed tower was $3.75psf, which is quite a bit higher than the average Class A office rate in downtown of $3.19psf but as high as $3.50psf at certain properties. The cost of construction materials have continued to rise and rise, so for a high-rise to be built in Sacramento by the private sector, the asking rate needs to be $3.75psf to make the project profitable.

So here we are again, another economic cycle and nothing will become of the vacant lot at 301 Capitol Mall. Whatever they do in the future, the proposal should give a since of place adding something unique to Capitol Mall. Let’s hope a beautiful building will be proposed, the proposal would not have to be tall, just unique and attractive like the Emerald Tower across the street.

For now, the vacant lot known as the “the hole in the ground” will continue to house the urban wildlife population. Just last weekend I saw three Raccoons cross Capitol Mall and go under the fence that surrounds the property.

P Street Office Building

The 20-story office building looks to be putting up steel for 17, 18, and 19th floors. After the 20th floor is completed, an upper stepped back will be added on to the left side to give the roof a slated look. If you look at the rendering, this slanted roof will expose much of the roof top equipment. If this project had gone through the Sacramento Planning & Design Commission, this would have been address and hidden like on privately built high-rises. Because the State does not need to go through the Cities review, all roof top equipment and machinery will be visible from the west. About 20 years ago the State built the 25-story EPA office tower on I Street with a similar slanted roof, and if your viewing the tower from the north you can see all the equipment and machinery on top of the building. I hope the rest of the building is okay, you never really know until it's finished.

https://app.oxblue.com/open/turner/nnrhproject

Taken from the Pioneer Bridge on Hwy. 50 going east.

MLS Denies Sacramento Expansion

After five year of being strung along, Major League Soccer has again awarded another city a franchise. The winner yesterday was St. Louis and their scheduled to kick off in a new downtown stadium is 2022. At this point, Sacramento appears to be used as leverage against other cities also wanting a franchise. There is steep price to join the league, in April the expansion fee went up to $200 million which many have forced the Sacramento investors to recalibrate?

From the beginning, I thought both our city leaders and media were far too confident believing Sacramento was all but officially awarded a new franchise. MLS still plans to expand another two team in the next few years, but Las Vegas, Indianapolis, Phoenix, Raleigh and San Diego are going do their best to emerge as the best candidates too. 

Construction By Years End

601 Capitol Mall Mixed-use development

Downtown Sacramento will see more residential at 601 Capitol Mall starting by years end. Construction on an eight-story mixed-use project will have 162-units and more that 7,000SF of retail space. No cost has been given  by Shorenstien Properties.

601 Capitol Mall Mixed-use development

CA Natural Resourses HQ

Well look at that, it's starting to make an impact on the skyline.

I Street Bridge Redesign Plans

Four design concepts are ready for public feedback for the new I Street bridge. There were originally nine designs in April but after receiving feedback, the number was narrowed down to four. KCRA report



The Thru concept is the least expensive option at $150 million

The Spring concept is priced at $180 million

The Solar Arch concept is $250 million with the most iconic structure

The Spring concept is also priced at $180 million

Tower 301 CEQA & Draft EIR

Proposed Tower 301 on Capitol Mall, 557' tall and 31 floors

The Draft Environmental Impact Report (EIR) for the Tower 301 Project (P18-078) located at 301 Capitol Mall is available to view and comment. The Comment Period is from July 3, 2019 to August 19, 2019.

http://www.cityofsacramento.org/Community-Development/Planning/Environmental/Impact-Reports
 
If you read the Colliers Sacramento Market Q2 2019 Office Market Report Final, it says, “Market vacancy rate is now at a 17 year low. Downtown tenants in Class-A high-rise floors facing $3.50/SF rents or higher will seriously consider relocation options in Natomas or other nearby suburban submarkets to cut costs or find more efficient space. ”I would guess this will make it harder fill the proposed Tower 301 where rents are quite a bit higher than 3.50/SF.

In my opinion, its tall but underwhelming. The proposed tower does not give any since of place or add anything unique to Capitol Mall. I had hoped a beautiful building would be proposed at the foot of Capitol Mall, and this is not it. The proposal would not have to be tall, just unique and attractive like the Emerald Tower across the street. Have you seen some of the other dynamic high-rises cities are getting lately when developers spend $500 million or less? For some reason Sacramento just does not inspire architects. 

Colliers Sacramento Office Snapshot: Q2 2019

Looks like another healthy quarter for Sacramento’s office market. Vacancy is at its lowest percentage since 2002 and the asking rate PSF/Month continues to rise. ColliersSacramento Research Department has the city looking very good.

Colliers Sacramento Office Snapshot: Q2 2019

ColliersSacramento Office Snapshot: Q2 2019

Download the latest Sacramento Office Market Report

“There Won't Be Any Slowdown In Sacramento Anytime Soon”

Colliers has made a big prediction about Sacramento’s future economic growth… they say there won’t be any slowdown in Sacramento anytime soon. I know right, how can they say this? Colliers sent out a Weekly Market Insights newsletter listing 7 reasons why. The Colliers crystal ball is ripe with opinions as well as some data to back it up.

Here are 7 reasons:

1. Alameda-based Penumbra is opening a 160,000 SF office in Roseville later this year, bringing 200 new jobs, with a possible second phase with 1,000 more jobs in the future
 
2. The State of California is running a $21B budget surplus and is building more than $4 billion worth of new office buildings in Downtown Sacramento

3. US Foods is building a 355K SF, $71.6M distribution center in McClellan Park and will bring up to 180 new jobs

4. Centene will be consolidating offices to its under construction 1.25M SF office campus in North Natomas with 3,000 new jobs
 
5.Healthcare continues to drive job growth throughout the region, adding thousands of jobs year after year with companies like Kaiser Permanente, Dignity Health, Adventist Health (just completed and occupied its new corporate headquarters), UC Davis, and Sutter Health all active in the medical office leasing and development

6.Bay Area companies and residents continue to flock to Sacramento seeking lower cost of living and better lease terms for both office and industrial real estate

7. Downtown Sacramento continues its encouraging pace of revitalization around Golden 1 Center and Sacramento is poised to get its second professional sports franchise with Sacramento Republic close to joining Major League Soccer, which will spur development at the Railyards where Kaiser is starting infrastructure work on its new hospital and a new office project and apartment development are close to starting construction.

Colliers also stated that we are currently celebrating 120 months of economic expansion and there have been few significant layoffs and office closures in Sacramento in recent months and the region continues to attract new companies and residents, experiencing healthy job growth in the 2-3% per year range and population growth around 1.5% a year.

Later this week the Colliers Q2 2019 Sacramento Office report will take a closer look at statistics and transactions.

Sign-up here to received interesting Sacramento news and market insights delivered to your inbox from Colliers.

Marshall/Hyatt Centric Hotel Brick & Terra Cotta

Marshall/Hyatt historic brick & terra cotta facades

Today the rectangular-shaped historic brick and terra cotta facades are left as the interior of the original structure has been removed. This is a unique project to preserve the historic exterior, keep an eye on how this all comes together.

 

Marshall/Hyatt historic brick & terra cotta facades

Marshall/Hyatt historic brick & terra cotta facades

Waterfront Days this Memorial Day Weekend

Sacramento Waterfront Days appears to be what Gold Rush Days in Old Sacramento use to celebrate. It seems to be almost identical minus the dirt covered streets and ends on Sunday. This three-day event takes place on Front Street, The Embarcadero, and the 1849 Scene all along the Sacramento River.  The heritage celebration features a wide variety of crowd-favorite entertainment, all free to experience and enjoy. Guests in Old Sacramento Waterfront will be entertained by talented period musicians performing live throughout the district in addition to a Shakespearian Comedic Play.  Experience the Gold Rush Fire Brigade (as seen at the Rose Bowl Parade), and other Old West theatrics, family-friendly melodramas, history re-enactments, horse-drawn carriages, canons, gold panning, hands-on children’s arts and crafts activities, the popular Tent City depicting daily life during the Gold Rush, and much more.

Friday, May 24th 
Education Day
1 PM: “Quest for the Gold Spike” Melodrama at the Eagle Theatre*
7 PM: Waterfront Days Bar Crawl
Saturday, May 25^th
10-5 PM: Outdoor Heritage Festivities
1 & 3 PM: “Quest for the Gold Spike” Melodrama at the Eagle Theatre*
6-10 PM: Brad Johnson & The Killin’ Time Band (Embarcadero)
Sunday, May 26^th
10-5 PM: Outdoor Heritage Festivities
1 & 3 PM: “Quest for the Gold Spike” Melodrama at the Eagle Theatre*
6-10 PM: The Rob Staley Band (Embarcadero)

Railyards Lot 48 Mixed-Use

Railyards Lot 48 Mixed-Use rendering looking south

This Thursday the 23^rd, a public hearing on this project will be at the  SacramentoPlanning & Design Commission. The development is intended to provide the first housing opportunities within the Railyards at the Southeast corner of 6th Street and Railyards Boulevard just east of the historic central shops and north of the Sacramento Valley Station. The Railyards area is just starting to develop, with backbone infrastructure still to be installed. The closest buildings to the project site include the large industrial edifices in the central shops area, and a mix of residential and government building south of the railroad in downtown.

Aerial site view of lot 48 in Railyards

No cost has been made public to build this project. 6 levels 75 feet tall 309 multi-unit dwellings, 69 of which are designated as income-restricted units and 4000SF retail.

Contextual aerial of Railyards

 

Historical context of the Railyards in the early 1900's

Changing Sacramento Skyline

Two high-rises will soon add a little bulk to the Sacramento skyline. In about two months the steel frame will be completed for the State Natural Resources building to the left of the twin state office towers pictured below. Also,  just to the right of the pyramid building the Sacramento courthouse will also begin sometime this year or next year.

Downtown Sacramento skyline as seen from levees near Davis

Look closely to see the crane for the State Natural Resources Bldg. 

Downtown Sacramento as seen from West Sacramento

Downtown Sacramento as seen from West Sacramento



Sacramento High-Rise Availability - 1Q 2019

Floor-by-floor Class A office space available in downtown Sacramento

This is encouraging news… downtown Sacramento Class A office vacancy rate is now 8.1%. Of the 16 existing high-rise buildings downtown, most are more than 90% leased. Colliers International has done the research to show floor-by-floor availability where the current asking rate per square feet is $3.19. Presently the only new office space under construction downtown is by the State of California, but these will not increase available space for the private sector. The lack of office space availability in downtown has edged up the asking price per-square-foot, but not enough to justify building a new high-rise.

Floor-by-floor Class A office space available in downtown Sacramento

How much do prices have to rise before it would be profitable to build a high-rise office downtown? Four years ago in 2015, Greg Levi a managing director with Jones Lang LaSalle Sacramento was quoted saying "Though rents are rising, though, they’re not high enough to bring construction cranes just yet. The highest rents, around $3.10 a square foot, are still about 40 cents below what a brand-new building would have to charge,” Levi said. So essentially Greg’s saying that rents would have to rise an additional 40 cents a square foot before it would be profitable to build this high-rise downtown… that’s a 13% increase. In the last four years construction material costs have also gone up so I think the 40 cent increase is now not enough and rents would possibly have to rise even higher that, maybe as much as $3.50SF for construction to pencil out. With the economy staying strong, we might reach a point where the private sector jumps in to build. 301 Tower is marketing its proposed tower on Capitol Mall but the Vanir Tower on J Street has ghosted and no one has heard a peep from them in months.

Sacramento skyline market vacancy and asking rate 1Q 2019

Sacramento market statistics 1Q 2019