Proposed 700 J Street Hotel

700 J Street, Sacramento, CA 95814

Last month Hume Development purchased the Capitol Bank Building at 700 J Street for $11.06 million with the intention of converting the 1917, 7-story building into 107 hotel guest rooms. The proposed project would maintain the building’s current exterior which is granite-clad but repurpose the interior spaces. The plans and costs to begin the transformation have not been shared yet, but the building will be renamed the Hotel Elanor.

Colliers Sacramento Office Snapshot: Q4 2024

Facing record vacancy, Sacramento’s office market is now just below a record high. Also reported in Colliers International Sacramento office market report, the State of California is set to vacate a sizable amount of space next quarter and its shedding of 1.1 million square feet of leased space. Occupancy losses are outpacing new signed leases with the Department of Corrections moving out of 283,504 square feet at 151 S Street in Q1 2025 as well as others if you read the report.

After the highest sales activity in Q1 2020, both office volume and sales have been falling since then. Some of the available office space will be converting to alternative uses, the former historic Capitol Bank Building built in 1915 at 700 J Street was recently sold to Hume Development for $11.06 million and they have plans are to convert the 7-story building in to 107 guestrooms. Colliers forecast for 2025 is renewed optimism, with most large move out finished by Q2 2025, availability could stabilize.

Macy’s To Close In Downtown

Macy's Department Store at 414 K Street Sacramento, CA

Sacramento’s Macy’s department store downtown has been named one of 66 planed locations to close in the next three months. The K Street location was originally built in 1962 for $13 million and has been the anchor for the former mall and shopping area. CBS News Sacramento says there is significance interest in the location. The Greater Sacramento Economic Councils Berry Broome says there is a need for support from the state about economic development and policy infrastructure. The Citrus Heights Sunrise Mall Macy’s will also close as an underperforming store.

New Sacramento Republic’s Stadium

Today, the 12^th of November the Sacramento City Council is expected to approved a proposed term sheet to build a soccer stadium in the Railyards downtown. The Wilton Rancheria tribe has become the majority owner of the Sacramento Republic FC and is now in the process of purchasing the land needed to build the new 12,000 seat stadium. The estimated cost will be $321 million and completed in 2027.

Redevelop Capitol Mall Offices Into Housing

Last year in August the State of California requested architects and general contractors to look at three state office buildings along Capitol Mall downtown and see if they can be converted into housing. Fast forward to today, the State of California has now declined any further request for money to move forward with the project... possibly because the crazy cost to continue and the States budget not as healthy as it once was. The three buildings that were under consideration were 800 and 801 Capitol Mall and 751 N Street. The three building could have add 700 units of housing. and it was clear the state didn’t have the funds for the adaptive reuse study. It will be interesting to see what other opportunities The California Department of General Services has for these buildings in the near future.

Update: Capitol Mall Redevelopment Proposal

 In April of 2021 I posted a grand vision the City of Sacramento has for the scenic Capitol Mall promenade west of the Capital up to the Tower Bridge. The city presently wants to spend $500,000 from Sacramento Area Council of Governments (SACOG) to move forward with the design. As reported by KOVR 13, the estimated cost to develop this plan could be $16 million, but if you have been paying attention to government spending (like many have) the real cost could be closer to $20 million or more.

The proposed design would be to reconfigure the street  to host large festivals and small farmers markets without shutting down the street. This would include removing 4 lanes of traffic and only have one in each direction, the center median of grass gone, wider sidewalks and another row of trees. I personally prefer  grand approach to Sacramento's Capitol Mall from the west this is a scenic promenade with a two lanes of traffic and a wide center strip devoted to vegetation. Today as we drive across the Tower Bridge, local residents as well as visitors have a clear view of the Capitol. Like I said in the previous post, what planners are doing is social engineering people to change driving habits. After Capitol Mall has the number of lanes reduced, traffic will be worse, hoping this congestion get you out of your car and take public transit instead. Manipulating people, changing behavior. This is happening on many downtown streets, often referred to as a road diet.  Your tax dollars at work as cities shut traffic lanes. On many streets and roads, road diets don't leave adequate capacity for cars and trucks. That pushes traffic onto other streets.

Renaissance Tower Sold

       Renaissance Tower at 801 K Street, Sacramento, CA

Last week the Renaissance Tower sold in an auction for $21 million to Ethan Conrad Properties as reported by KCRA 3. The 28-story office building has a current occupancy rate of 27%, but the new owner plans to renovate the office space and add restaurants into the building as well. The last time the tower was sold was in 2016 for $80 million, so this is a good price.

Colliers Sacramento Office Snapshot: Q3 2024

Vacancy have moved higher according to Colliers Sacramento 3^rd quarter report. Colliers states that because the State of California is vacating 278,000 square feet across four buildings, occupancy losses have pushed higher but there is hope of a recovery in mid-2025.

Two Downtown buildings sold at substantial discounts, reflecting the office sector’s pricing reset. Ethan Conrad Properties acquired 770 L Street for $22.5 million ($132/SF), a 52% drop from when New York Life bought it in 2018. Ethan Conrad also purchased 630 K Street for $10.3 million ($119/SF), a 63% drop in value since early 2020. An affiliate of Buzz Oates is reportedly under contract to acquire 400 Capitol Mall from Manulife for $117 million, which would be a 41% decline from the 2019 purchase price. 801 K Street, which is only 27% leased, is going up for auction on October 21 at an $8.5 million starting bid. It sold for $79.2 million in 2016.

Wells Fargo Tower Sold

The decline of downtown Sacramento and the office market is now more clear than ever. As reported by KCRA 3, Sacramento's tallest tower has sold for a steep decline, a 67% drop in value from what it was most recently sold for. The tower was originally constructed for $120 million in 1992 and sold in 2000 for $130 million. The building was later resold again to to Hines’ Core Fund in 2007 for $237,250,000 million. The 501,308-square-foot was most recently sold to an all-cash buyer for $117 million. 

Renaissance Tower Will Be Auctioned

 
The 28-story Renaissance Tower at 801 K Street will be up for bid on October 21^st. As stated in the Sacramento Business Journal, the building is currently 27% leased, well below most other "trophy" office properties in Sacramento's urban core. Renaissance Tower also has a seven-story attached parking garage. the starting bid for the building would be $8.5 million. That's nearly a tenth of the building's last sale price, $80 million in 2016. 

On-Hold: 201 N St. Residential High-Rise

It’s been reported in the Sacramento Business Journal that the proposed 28 story residential high-rise at 201 N Street has officially been paused. With no activity with the city of Sacramento to secure building permits since 2022, it’s a safe bet Southern Land Company is feeling the pinch from the slowing economy. The proposed project exterior looked to be made with high quality materials and lots of details. Does Sacramento have enough deep pockets to rent out or own enough of these high-rise units to make them profitable? I would say no, that is why downtown sees lots of residential projects being built up to eight stories, after that the construction costs to go taller are to high and there are not enough people in Sacramento willing to pay that high amount to live there. I could make an extensive list of all the failed high-rise residential projects in Sacramento in the last 40 years, this might be another.

Colliers Sacramento Office Snapshot: Q2 2024

I’m a little slow on getting this posted, but ColliersSacramento Q2 office market report shows several challenges that appear show a trend for the region. As stated in Q2 2024 Sacramento Office Market Report, Sacramento’s office market maintained its trajectory toward setting a record high vacancy rate later this year. Downsizing and consolidation has pushed the market towards record high vacancy rate. There was a negative absorption of -140K sf in the quarter with more planned in the next 12 months with multiple large vacancies slated for the second half of the year (read more under Absorption & Demand).

But on a positive note, Capitol Mall’s properties are recording significant occupancy gains through the first half of the year. 400 Capitol Mall went on the market for sale this quarter and will test buyer demand for stabilized Class A high rises.

Colliers forecast that the State of California’s return to office this summer, two days a week will increase foot traffic in the urban core. The Sacramento office market has been downsizing for the last four years. With the lack of demand, local office inventory will likely diminish in years ahead. There are approximately 1 million square feet of office properties being evaluated for conversions to alternative uses, including medical office, apartments and hotels.

SOLD – 301 Capitol Mall

301 Capitol Mall - Taken in 2010

After nearly 18 years and several attempts to develop the land, CalPERS has sold the former twin 53-story Tower on Capitol Mall site to the Shingle Springs Band of Miwok Indians. Located at 301 Capitol Mall, the property was sold for $17 million and the Miwok Indians have said they have not plans for the site. The 2.39 acre block is currently fenced off with over a thousand piles poking out of the ground where 615 foot tall towers would have gone. The site is also over grown with full size trees on the southern side facing Capitol Mall. Social media seems to be excited that a casino could someday be built there, not me.

Resources Building Renovation – Exterior Replacement

1416 9th St. Resources bldg. renovation

The 60 year old Resources Building at 1416 9^th Street is now having the exterior cladding attached. It appears modern and clean, but the exterior has now lost any architectural significance and will soon be a featureless, bland glass tower. The original exterior had character and reflected a time that was the beginning of office high-rises being built in downtown.

1416 9th St. Resources bldg. renovation

The cost to do a total replacement of the exterior must have expanded the overall $461 million renovation costs quite a bit. It was not that long ago in 2010 two 18-story State office towers in downtown were also renovated. Both State offices #8 & #9 at 714 P Street had both interior and exterior upgrades while also keeping the original exterior design. AC Martin rendering

1416 9th St. Resources bldg. renovation

Resources bldg. AC Martin rendering

Resources bldg. AC Martin rendering

Alhambra Blvd. Housing

Mixed-use project at 324 Alhambra Blvd. Sacramento, CA

A mixed-use proposal has been submitted to the city along Alhambra Blvd. to build a six -story, 302 housing units with 344 parking spaces. The estimated construction costs for this proposal at 324 Alhambra Blvd. is estimated to be $71 million and it’s unknown when the project might start. Before construction begins, it looks as if all the current structures will be demolished except one home on C Street.

Mixed-use project at 324 Alhambra Blvd. Sacramento, CA

Kaiser Hospital Plans For Railyards

Kaiser Sacramento Railyards Medical Center

Earlier this month Kaiser filed plans with the city to develop a medical facility in the Railyards. The main hospital building proposed would have 310-bed in an eight story building in addition to a parking structure, five story support building and energy center. The eight story building would have 657,500 square feet and the total property size for the project would be 17.4 acres at 105 Bercut Drive. Kaiser has an aggressive deadline with plans to begin construction this year. The estimated budget is at least $1.5 billion. To see more renderings and learn more about the project, go to AgencyCounter and click on the yellow dot at the corner of 5^th Street and Railyards Blvd.

It looks to me that the land around the car garage could be developed at a later date to expand and build another “L” shaped hospital… maybe when the Railyards are fully built out.

Kaiser Sacramento Railyards Medical Center

Kaiser Sacramento Railyards Medical Center

Kaiser Sacramento Railyards Medical Center

Colliers Sacramento Office Snapshot: Q4 2023

It’s becoming pretty evident that the local office market is in a death kneel. In just a few months when the new State of California’s Richards Blvd. office complex opens, the delivery of 1.25 million square feet will lead to vacancies in both state-owned and leased offices as the state fills the new complex. In the current Colliers Q4 Sacramento office report, there are several office properties that are being considered for office conversion to housing, one location is at 1800 3^rd Street, the vacant CalPERS building could convert to 141 apartment units. The State has three buildings on Capitol Mall totaling 1.08 million square feet of existing office space currently being evaluated for office to residential conversion.

Colliers fourth quarter report also shows the Sacramento office market recorded its sixth consecutive quarter of occupancy losses. For the year of 2023, there was a total net loss of -1,184,793 square feet of leased office space which is a slight improvement compared to 2022, but It appears the vacancies numbers are due to rise some more in 2024.

Colliers Sacramento Office Snapshot: Q3 2023

The third quarter of 2023 recorded more of the same across Sacramento’s office market. As stated in the Sacramento Colliers Office MarketReport, the shift toward hybrid work will lead to higher vacancy rates for a prolonged period and some office properties will need to be repurposed to alternative uses. The regional vacancy rate rose to its highest level since the end of 2012 as it approaches the all-time high of 21.7% from Q4 2011. Total occupancy losses since April 2020 have now surpassed 4.86 million square feet. With the State of California planning to vacate approximately 300,000 square feet of leased space in early 2024. It’s possible the market will set a new record-high vacancy rate by mid-2024 if current trends fail to change course.

The market report by Colliers also stated that some office owners will have to seriously consider converting properties to alternative uses to generate income. The State of California selected McCormack Baron Salazar as the lead developer to convert three state office buildings on Capital Mall in Downtown Sacramento into upwards of 400 affordable apartment units. Many local office buildings fail to meet the criteria for viable conversions to housing. A National Bureau of Economic Research report found only 33 buildings totaling 1.3 million square feet that could realistically be converted into apartments.

How Not To Add To A Historic Building

 Now that the former Capitol Annex is demolished, it’s puzzling to see that the state has not shown an official rendering of what will replace the old structure. Here are some images from 2022 of the proposed Capitol Annex replacement buildings.  Much larger, with a glass exterior, overpowering the historic 1860's Capitol, and diminishing the view of the architectural front. It also appears that all approaches to the historic 1860’s capitol are now below grade, changing the historic character of the building.

You could argue that the proposed rendering negatively impact the historic 1860’s capitol.

Constructing a new addition on or adjacent to a primary elevation of the building which negatively impacts the building's historic character.

Attaching a new addition in a manner that obscures, damages, or destroys character-defining features of the historic building.

Placing new construction too close to the historic building so that it negatively impacts the building's character, the site, or setting.

Constructing a new addition that is large as or larger than the historic building, which visually overwhelms it (i.e.; results in the diminution of loss of its historic character).

Adding new construction that results in the diminution or loss of the historic character of the building, including its design, materials, location, or setting.

Constructing a new building on a historic property or on an adjacent site that is much larger than the historic building.

Housing Proposed at Former SacBee Building

The city is reviewing a proposal to demolish the former Sacramento Bee building at 2100 Q Street and develop a 538 apartment complex. Shopoff Realty Investments hopes to have it break ground in 2026 and open in 2028. The proposed project will consist of two mirrored wrap buildings, with 5 levels residential apartment and 5.5 levels of parking garage. A pedestrian paseo connecting the 22nd street in the north and the multi-family community in the south is proposed in between the two buildings.

There would be  approximately 3,400 SF leasing and mail on ground level at the corner of Q Street and 23rd Street (or 21st Street for building 2), approximately 3,893 SF amenity space on ground level connecting an on grade pool courtyard facing the paseo, 298 parking spaces, and courtyard facing R Street are proposed within each independently functioning building/community.