Colliers Sacramento Office Snapshot: Q2 2023

The Sacramento vacancy rate has hit 20% with a negative net absorption of -279,278 square feet. Sales appear to also be down because of higher barrowing costs. As reported by Colliers Sacramento, the local unemployment rate was 3.9 in May with employed persons at 1.09 million, but local layoffs have stated to increase so far this year.

As of June 2023, there were only 13 office buildings in the Sacramento region that were potentially troubled, in special servicing, or in foreclosure, totaling 1.68 million square feet of space and $163 million in loan value, according to MSCI Real Capital Analytics, which equates to less than three percent of the office market. Through Q1 2023, some $4.1 billion of new office assets were added to the troubled group of office properties nationally and more loans are set to mature in the office sector than any other asset class.

The Judicial Council of California’s new Sacramento County Courthouse located on the southeast corner of The Railyards north of Downtown will be completed in the next nine months. North of The Railyards, the State of California’s 1.25 million square foot Richards Boulevard Complex in The River District is due to be completed by Q1 2024. This project will kickstart the consolidation of multiple state government departments into these brand-new buildings and is expected to be a catalyst for ongoing development in this emerging mixed-use district. CalSTRS’ new building at 200 Waterfront Place is due to deliver in Q3 2023, which will bring 200,000 square feet of available space in its current 100 Waterfront Place building into the vacancy column.

Demolition begins On Capitol Annex

The term "Demolition by Neglect" fits the current state of the Capitol Annex that is now being demolished. For decades the State failed to properly maintain and upgrade the Capitol Annex, therefore it is now in disrepair and needs to be torn down. State legislators for nearly 70 years didn't even do the minimum to keep the structure up to code or make any upgrades throughout the life of the structure. The budget to replace the Annex is currently $1.4 billion, as you know, this estimate will be way under budget when the project is completed in five or six years. It was only three years ago when the proposal was estimated to be $775 million. The State doesn't even have a rendering of the replacement building to show the public, just another reason why public trust of all politicians is at an all time low. 

28-Story Hotel Proposed

At the corner of 15^th and K Street a 300 room hotel has been proposed. Yahoo! News mentions that the project would include a pedestrian bridge to connect to the Convention Center, a roof top bar/restaurant and 28 residential units over four floors. The land is currently a parking lot owned by AKT Development. The projects sponsor is reported to be Gafcon Construction firm. Gafcon will partner with Tony Giannoni who has lead previous Sacramento construction projects such as Sutter Health corporate headquarters, the Meridian Plaza and the Residence Inn.

It appears there have been no plans have filed with the city planning department, estimated cost, or estimate for ground breaking. It’s mentioned in the article that the developer will be asking the City for a subsidy from the current 12% tax by stays in the new hotel to help fund the project.

Back in 2017, the then proposed Convention Center renovation also include plans for a K Street hotel. At the time no developer was named to build the 350-rooms standing 300 feet tall. http://livinginurbansac.blogspot.com/2017/12/sacramento-convention-center-expansion.html

Knott's Landing - Proposal From Times Past

Knott's Landing - Sacramento theme park proposed in 1990"s

Knott's Berry Farm once tried to buy up some land north of Old Town Sacramento and make it into a Theme Park called "Knott's Landing". The theme park was proposed in the mid 90's and would have been along the Sacramento River and  Old Sacramento. From what I have seen, the proposal, it was quite detailed, but in the end it it ran afoul of the Old Sacramento Master plan. It appears the "I" Street bridge would have been dismantled and new bridge built where one is currently in the planning stages. It also included a baseball stadium about the size of the Rivercats ballpark and an indoor arena. It also looks as if the train tracks would have been realigned under the new bridge in a northeast direction to a new train station. I think it would have been successful, a fun place for locals and visitors to enjoy.  
http://www.robinshall.com/knotts-landing-sacramento

Robin Hall the award-winning theme designer returned my request for additional info with this message. "We did the drawings for Knott's Landing in late 1996-into January 1997. My boss; Terry Van Gorder, was always trying to get the Knott Family to expand the brand and build other parks and Knott's Camp Snoopys in different locations around the world. So I would draw up different proposed parks and we would present them. Unfortunately the Family was very risk averse and didn't want to invest anything beyond the design and the branding."

Knott's Landing - Sacramento theme park proposed in 1990"s

Knott's Landing - Sacramento theme park proposed in 1990"s

Knott's Landing - Sacramento theme park proposed in 1990"s

Colliers Sacramento Office Snapshot: Q1 2023

Regional Vacancy Rate Ticks Up to Highest Point in a Decade. As reported by Colliers Sacramento, the vacancy rate appears poised to rise through much of the rest of the year with large blocks of space to be vacated by CalSTRS and Centene likely to outpace scheduled occupancies of vacant buildings by UC Davis Health, California Highway Patrol, and CapRadio.

Colliers Sacramento Office Market Absorption & Vacancy Rate 2014-2023

Quarterly net absorption was -464,299 square feet but would have been slightly positive without Centene’s 517,000 square foot vacant sublease in North Natomas. The Sacramento region’s office market has now witnessed a staggering amount of occupancy losses since early 2020 as companies are reorienting their office space requirements in this new age of hybrid work. Diminishing office occupancy and falling net operating incomes are beginning to lead to distress in the office sector. It is likely property defaults will rise in the next two years as mortgages signed before the pandemic expire.

Colliers Sacramento Market Fundamentals 2023

Colliers Sacramento Office Development Pipeline 2018-2024

Changing Sacramento Skyline

Downtown Sacramento

J Street in Downtown Sacramento

 

Sacramento County Courthouse Construction

Sac. County Courthouse looking west from F & 7th Streets

The New Sacramento Courthouse exterior skin was completed in September of last year as well as the curtainwall installation (except for leaveouts) and Clark Pacific has completed precast panel installation. It appears interior is where much of the work is focused on right now. Opening will likely occur in Q1 2024 per the contractor’s current schedule.

Sac. County Courthouse looking west from F & 7th Streets

Sac. County Courthouse looking west from F & 7th Streets

Sac. County Courthouse looking west from F & 7th Streets

Sac. County Courthouse looking west from F & 7th Streets

Sac. County Courthouse looking west from F & 7th Streets

Sac. County Courthouse looking west from F & 7th Streets

Sac. County Courthouse looking west from F & 7th Streets

Resources Building $461 Million Renovation - Update

The Resources Building Renovation Project (Project) involves a tear-down of the 17-story 657,000-square-foot building leaving the building’s steel frame, then reinforcement/rebuild matching the current footprint, mass, and height. The Project would include code-required improvements, including seismic upgrade, installation of a building-wide fire sprinkler system, reconstruction of three 17-story exit stair towers, and replacement of asbestos-containing fireproofing. Antiquated mechanical, plumbing, electrical, security, and telecommunication systems will be replaced, completely upgrading all infrastructure systems. The Project will make the building safe while honoring the building's historic qualities.

The Resources Building at 1416 9th Street in downtown Sacramento

The Project goal is to achieve Zero Net Energy and Leadership in Energy and Environmental Design (LEED) Silver certification. Project delivery and Completion is anticipated in Spring of 2025, within 42 months of Notice to Proceed (NTP). Project will include exterior envelope replacement, including installation of new roof and insulation, window system, and building skin.

https://rbr.gilbaneco.com/

The Resources Building at 1416 9th Street in downtown Sacramento

The Resources Building at 1416 9th Street in downtown Sacramento

The Resources Building at 1416 9th Street in downtown Sacramento

The Resources Building at 1416 9th Street in downtown Sacramento

The Resources Building at 1416 9th Street in downtown Sacramento

The Resources Building at 1416 9th Street in downtown Sacramento

Capitol Park Hotel Renovation Almost Ready For Homeless

Capitol Park Hotel at 1125 9th St, Sacramento, CA
was originally built in 1912

The 110-year-old Capitol Park Hotel is starting to look livable, renovations of the historic building will finished soon and the Sacramento homeless will be able to move in. The local news has reported that the cost to renovate the building has gone up from the original $58 million to $64 million. Originally, the  per foot cost breakdown was $1,000 per square foot. If you look at just the per square foot cost, this is the most expensive residence in Sacramento county. The age of the building means the renovation is costing more than $445,000 per unit., but costs have gone up so this is now a low number.

Capitol Park Hotel at 1125 9th St, Sacramento, CA
was originally built in 1912

Capitol Park Hotel at 1125 9th St, Sacramento, CA
was originally built in 1912

Capitol Park Hotel at 1125 9th St, Sacramento, CA
was originally built in 1912

Legal Trouble For Capitol Annex

North entrance into the California State Capitol

A December court ruling has delayed the demolition of the existing Annex and construction of a new building, parking garage and visitor center by requiring the state Department of General Services to recirculate its environmental impact report for public input.

As reported by CapRadio, neither legislative leaders nor DGS have released a new timeline for the project or its received impact reports following the court ruling. The Annex portion of the Capitol was closed over a year ago and demolition has not begun.

Opponents of the planned $1.2 billion revamp of the California state Capitol Annex are calling for the state to reconsider the entire project. the state is projected to experience a budget deficit of more than $22 billion this year.

Materials on the north side of the State Capitol

Looking inside the 8 foot fence sounding the State Capitol

Looking inside the 8 foot fence sounding the State Capitol

East entrance of the State Capitol

East entrance of the State Capitol

East entrance of the State Capitol

Governor Newsom

The Wong Center

In the Railyards at the corner of 7^th and F Streets affordable housing for seniors is under construction. The project will have 150 units and a 400 square feet of community space. Construction began in June 2022, and occupancy is expected for early 2024. The project is estimated to cost $52 million, with $6.3 million of funding from the County and $7.3 million from the city.

The Wong Center, 530 7th St, Sacramento, CA 95814

The Wong Center, 530 7th St, Sacramento, CA 95814

The Wong Center, 530 7th St, Sacramento, CA 95814

The "Cypress" at 14th & N Streets

Back in October of last year the CADA site at 14^th & N Streets broke ground. The Cypress will be eight-stories with 98 residential units facing Capitol Park. Total costs are estimated at $49 million and expected to be completed in late 2024. Once completed, this will be a nice addition to the neighborhood.

The "Cypress" foundation being dug

The "Cypress" foundation being dug

The "Cypress" construction site looking west on N Street

The "Cypress" rendering at 14th & N Streets

Colliers Sacramento Office Snapshot: Q4 2022

Demand for office space keeps plummeting in the Sacramento region as net absorption was negative for a second consecutive quarter. The State of California continues to downsize leased space while consolidating into new construction or owned office buildings. The Q4 of 2022 saw another negative -683,521SF in addition to the -646,086SF from the Q3. Colliers Sacramento office market report says we will continue to see vacancy rise as demand plummets.

From Q2 2020 through Q4 2022, more than 3.6 .million square feet of vacant office space has been added to the market in a region the has 57.6 million total inventory. Read more here from the Colliers Sacramento 2022 Q4 office market report.

Lot-X Proposal Plans Revised

Southern Land Co. who originally proposed a 32 story residential tower and 5 story office has now revised the plans to include a 26 story tower and a 14 story building. The shorter building is replaced by  the 14 story building and the 32-story is now 26-story.  The developer plans to release more details in the coming months and the start construction in the second half to 2023. I believe shorter towers have a better chance of being built in Sacramento, and history has shown us this. I will be both shocked and pleased to see this proposal built. Sacramento Business Journal

Mid-Rise Apt. Proposed Along American River

In the River District along the American River, residential towers have been proposed with a total on 826 units. The development is proposed on Burcut Drive off Richards Blvd. which is currently a warehouse area and is currently a tough part of town to be in day or night. The location is right up next to I-5 and the upper floors looking west will hear and see 10 lanes of freeway traffic 24/7.

This proposal named American River One would include two towers nearly 200 feet tall, a third tower 150 feet tall and another tower at 109 feet tall. No plans have been submitted to the city or cost estimate for construction. 

Township 9 - Marketing Office/Biotech Lab space for lease

Township 9 is currently owned by 29th Street Capital. Phase C is on the south side of the site located at the light rail stop and runs along Richards Boulevard directly across the street from the 1.3MM SF State of California office complex slated to be delivered in 2025 and house 5,000 employees. The west half of the Phase C will be comprised of a 120,000 SF biotech office building.