Sacramento Proposal/Approval/Construction Thread - III

[snfenoc]

Originally Posted by j_deguzman10

Innov8 I have a question regarding the Colliers Q1 report you recently posted: is the $3.00 sq/ft total asking office rate or just Class A space downtown? If it's the former, doesn't that mean that Vanir Tower is close to construction because office levels are pre recession and apparently asking rents need to be around $3.10 sq/ft before construction is justifiable???

I know your question was directed at Innov8, but I thought I might chime in as well.

Right direction, wrong time: I think that Sacramento is on track to see a new, private office tower (maybe two). However, I think that groundbreaking is still about 18-36 months away. My understanding is that rents in the Downtown sub market must hit the target (replacement cost) rate before a new office tower is viable; they cannot simply be close. Assuming that the replacement cost is $3.10 sq/ft, rental prices would have to rise another 3.3%. Given that last year's rise (Q1-2017 to Q1-2018) was 2.7%, I think we still have a ways to go.

Shifting goalposts: Also, if construction prices continue to rise, the target rate may rise as well.

Not all office buildings have to be "Spec": While it looks like the state and Centene are about to flood the market with a lot of office space, these millions of square feet are already spoken for. IF a developer can find a company (or companies) that wants to relocate to Sacramento, rental rates could be less important.

It's very easy to look at the numbers an get excited, but you have to think like an investor. What are we seeing right now? Vacancy is down, net absorption and rental rates are up. That should be it; we should be sprouting towers any minute now, right? Not quite. The Sacramento market is considered to be a safe haven for investors. Shorenstein just bought 601 and 621 Crapitol Mall. One of those addresses is an office building. The other is only capable of supporting a mid-rise housing development - according to Shorenstein. Investors see steadily increasing rents and steadily increasing demand. What they don't see is much new competition in the near future - that's why they are buying office buildings, right and left.

[snfenoc]

Kress Building downtown marketed for conversion to lofts
By Ben van der Meer – Staff Writer,
Sacramento Business Journal
May 14, 2018 - 4 hours ago
https://www.bizjournals.com/sacramen...ersion-to.html

A downtown Sacramento office building for sale is being marketed for potential conversion to residential lofts on its upper floors and retail at the street level.

Built in 1931, the Kress Building at 818 K St. is a six-story office building that hasn’t had any tenants since about 2010, said listing agent Mike Wahba...

• Could become luxury 36 units + a penthouse.
• First floor and top floor would be a restaurant and bar/nightclub
• The building is on the market for $8 million
• The building is in good shape and was retrofitted recently. Therefore, conversion to residential may not be as expensive as one might think

At this point, this is only a marketing strategy to sell the building. However, I have always thought that apartments/condos should be the direction for the Kress building. Granted, I'd rather see more units in the 600-900 sq ft range. Still, I'm glad to see that the potential for housing at the Kress exists. Every little bit helps.

[j_deguzman10]

Originally Posted by snfenoc

Kress Building downtown marketed for conversion to lofts
By Ben van der Meer – Staff Writer,
Sacramento Business Journal
May 14, 2018 - 4 hours ago
https://www.bizjournals.com/sacramen...ersion-to.html

• Could become luxury 36 units + a penthouse.
• First floor and top floor would be a restaurant and bar/nightclub
• The building is on the market for $8 million
• The building is in good shape and was retrofitted recently. Therefore, conversion to residential may not be as expensive as one might think

At this point, this is only a marketing strategy to sell the building. However, I have always thought that apartments/condos should be the direction for the Kress building. Granted, I'd rather see more units in the 600-900 sq ft range. Still, I'm glad to see that the potential for housing at the Kress exists. Every little bit helps.

May I also add that Ben also reported that 800K by CFY will start this summer at the end of the article, presuming that The Hardin finishes its construction by the expected May or June. If that’s the case, this is wonderful. K street is starting to turn into R Street in midtown with new mid rises and great restaurants! 150 units near the G1C is much needed, and with the hopeful construction of the Marshall and Greyhound, that side of K street will be restored to its former glory back in the 60s!

[j_deguzman10]

Originally Posted by snfenoc

I know your question was directed at Innov8, but I thought I might chime in as well.

Right direction, wrong time: I think that Sacramento is on track to see a new, private office tower (maybe two). However, I think that groundbreaking is still about 18-36 months away. My understanding is that rents in the Downtown sub market must hit the target (replacement cost) rate before a new office tower is viable; they cannot simply be close. Assuming that the replacement cost is $3.10 sq/ft, rental prices would have to rise another 3.3%. Given that last year's rise (Q1-2017 to Q1-2018) was 2.7%, I think we still have a ways to go.

Shifting goalposts: Also, if construction prices continue to rise, the target rate may rise as well.

Not all office buildings have to be "Spec": While it looks like the state and Centene are about to flood the market with a lot of office space, these millions of square feet are already spoken for. IF a developer can find a company (or companies) that wants to relocate to Sacramento, rental rates could be less important.

It's very easy to look at the numbers an get excited, but you have to think like an investor. What are we seeing right now? Vacancy is down, net absorption and rental rates are up. That should be it; we should be sprouting towers any minute now, right? Not quite. The Sacramento market is considered to be a safe haven for investors. Shorenstein just bought 601 and 621 Crapitol Mall. One of those addresses is an office building. The other is only capable of supporting a mid-rise housing development - according to Shorenstein. Investors see steadily increasing rents and steadily increasing demand. What they don't see is much new competition in the near future - that's why they are buying office buildings, right and left.

Thanks for responding snfenoc! You are right, while we are seeing growth in the office market, it appears that most of the tech startups and other companies in Sac either want to be in re-use buildings (The Cannery) or in Natomas and other suburbs (2020 Gateway and Centene). It is possible that it could be because of the rising rents and lack of land downtown that major companies like Centene can’t build a large campus or startups like SupportPay cannot afford a large office space in a skyscraper.

Let’s just hope the market can sustain itself for a few more years or else it’ll be another round of disappointment for the city of Sacramento.

[j_deguzman10]

Well, looks like Governor Brown’s budget is going to add ANOTHER courthouse to the skyline, the 17 story building that was proposed will likely get built as Brown set aside nearly 500 MILLION dollars for the new skyscraper that, according to Innov8 on Livinginurbansac, is extremely unappealing, which I agree.

[snfenoc]

Originally Posted by j_deguzman10

Thanks for responding snfenoc! You are right, while we are seeing growth in the office market, it appears that most of the tech startups and other companies in Sac either want to be in re-use buildings (The Cannery) or in Natomas and other suburbs (2020 Gateway and Centene). It is possible that it could be because of the rising rents and lack of land downtown that major companies like Centene can’t build a large campus or startups like SupportPay cannot afford a large office space in a skyscraper.

Let’s just hope the market can sustain itself for a few more years or else it’ll be another round of disappointment for the city of Sacramento.

Another thing to consider is that, with automation, companies may not have the need to house lots people in tall skyscrapers. There may be a preference for smaller spaces. In some cases "built-to-suit" may work as well. I imagine that these buildings may do better in office parks and in the suburbs.

[kamehameha]

I think I'm about right on my prediction that at least 4 midrises/highrises will be under construction or added to the Sacramento skyline by 2020( the two state offices, the courthouse and the proposed 20 story convention center hotel). the Marshall hotel and the Calpers/CIM 30 story proposal on 301 capitol mall could even break ground before 2020.

[j_deguzman10]

Originally Posted by kamehameha

I think I'm about right on my prediction that at least 4 midrises/highrises will be under construction or added to the Sacramento skyline by 2020( the two state offices, the courthouse and the proposed 20 story convention center hotel). the Marshall hotel and the Calpers/CIM 30 story proposal on 301 capitol mall could even break ground before 2020.

Kamehameha so you are really confident that the Metropolitan, Cathedral Square Commons, Sacramento Commons, Yamanee, and Vanir will not happen? Also, don’t forget about all the mid rises in midtown and downtown (Site 21, Greyhound, Shorenstein (If they build 14 stories).

Also, CIM is thinking about 40 stories now so hopefully they build that soon but 301 is also the site of the amphitheater of the proposed all star game.

[kamehameha]

no they're not going to get built especially the metropolitan and the vanir. the amphi theater is just a temporary structure being planned for the all star weekend. If the 30 story gets built, they will move it to the railyards.

[j_deguzman10]

Originally Posted by kamehameha

no they're not going to get built especially the metropolitan and the vanir. the amphi theater is just a temporary structure being planned for the all star weekend. If the 30 story gets built, they will move it to the railyards.

I doubt the two will get built in the short term or long term but I feel like Vanir could get built, sfecnoc indirectly said Vanir could get built cause the market might be ready in around a year or two.

What makes you say that the buildings, or most proposed buildings will not get built? Do you think that high rise buildings have a place in Sac or will it be destined to be a mid rise market kamehameha?

(Not to be pushy but I’m curious ☺️)

[yolonative]

Originally Posted by j_deguzman10

Well, looks like Governor Brown’s budget is going to add ANOTHER courthouse to the skyline, the 17 story building that was proposed will likely get built as Brown set aside nearly 500 MILLION dollars for the new skyscraper that, according to Innov8 on Livinginurbansac, is extremely unappealing, which I agree.

Do you have an article/link that elaborates on this?

[Pistola916]

Originally Posted by yolonative

Do you have an article/link that elaborates on this?

Mayor Steinberg tweeted earlier Gov. Brown’s budget will include funding for new downtown courthouse.

https://twitter.com/Mayor_Steinberg/...197922817?s=20

[j_deguzman10]

Originally Posted by yolonative

Do you have an article/link that elaborates on this?

I can’t screenshot something on Twitter, but check Mayor Steinberg’s official twitter and his new website, he praises construction of the new courthouse and calls it “much needed”.

[ozone]

I hate the location and design of the new courthouse. Bad move Sacramento. But it’s the County so what do you expect?

[kamehameha]

the new courthouse is getting closer to reality.

http://www.sacbee.com/news/local/article211142559.html

[TWAK]

Originally Posted by j_deguzman10

Well, looks like Governor Brown’s budget is going to add ANOTHER courthouse to the skyline, the 17 story building that was proposed will likely get built as Brown set aside nearly 500 MILLION dollars for the new skyscraper that, according to Innov8 on Livinginurbansac, is extremely unappealing, which I agree.

What is the other new courthouse? It's not also going into the railyards, is it?

[j_deguzman10]

Originally Posted by TWAK

What is the other new courthouse? It's not also going into the railyards, is it?

TWAK it's the same courthouse that was proposed last year, it's going near the railyards but not in it. The courthouse is supposed to bridge the gap between the Railyards and Downtown, but idk how that's going to happen.

[Pistola916]

Originally Posted by j_deguzman10

TWAK it's the same courthouse that was proposed last year, it's going near the railyards but not in it. The courthouse is supposed to bridge the gap between the Railyards and Downtown, but idk how that's going to happen.

Gosh. I hope that’s a conceptual rendering. How do you not put any windows on the side of the building?

[SacTownAndy]

Originally Posted by kamehameha

the new courthouse is getting closer to reality.

http://www.sacbee.com/news/local/article211142559.html

I know I'm in the minority, but I kind of like it... well, at least for a courthouse. And it'll block the ugly back side of the Federal courthouse we've all been staring at for 20 years. Hopefully there'll be some type of lighting element.

[snfenoc]

Apartments planned for alley near 29th Street in midtown
By Ben van der Meer – Staff Writer, Sacramento Business Journal
May 16, 2018 - 2 hours ago

https://www.bizjournals.com/sacramen...street-in.html

New apartments will pop up on an alley-facing pair of empty lots along 29th Street in midtown Sacramento.

Contractor and developer Navinder Bhandal said the 12-unit project is made a bit easier by facing into the alley rather than the busy three-lane, one-way 29th Street.

Location: 29th and Historic Alley (Between H & I Streets)

This is one of those "every little bit" helps projects. I would love to see MANY more of these.

I think another developer had planned a similar 12-15 unit project further down, on a different alley: either Liestal, Matsui, Neighbors, Carriage Path, or Powerhouse. However, community activists complained and stopped it. They said it was too tall and would block the views of neighboring homes. Additionally, they said it would reduce sunlight to the backyards/backsides of those neighboring homes - for maybe an hour or two.

Of course, when one lives in a big city, they have every expectation to maintain their beautiful alley "views" and their total access to sunlight at the expense of development. Sigh.