It’s not the Gold Rush…….
Gradual Value Appreciation? I think not. Property is selling in the Midtown and Downtown Markets (The Core) for prices that are justified by increased demand for housing in Core, the development of the Arena and a multitude of other developments (see this October 14 Post onUrban Land Value. Demand should remain strong as more people continue moving into the Core.
The Arena Effect Drives Property Values
When the Arena was announced, overnight, property values in the vicinity of the site went up at least 25%. With: Examples include 555 Capitol Mall, 501 J Street, the Travelers Hotel Office Building, and the former Greyhound Bus Station. For Sacramento, the Arena changed everything. I made that case more than two years ago when comparing the Golden 1 Center to San Diego’s Petco Park.
Midtown hasn’t needed the Arena to take off. Midtown rents remained suppressed for years. New development is helping rents catch up with the area’s value and appeal. New housing, the Sutter Hospital, and projects like Whole Foods at 20th and L Street continue to strengthen the market. Land is selling, and more land is sure to trade hands in an accelerated pace the next three years.
Sales That Reflect Rising Values
Below are a three comparable sales that demonstrate the spiking values of commercial property in the core.
Sale #1: The half Block of 9th and S Street, home of Insight Coffee and former HQ of Murray Industrial Supply. This property sold for about $70 a square foot. Two years ago, this property may have fetched $35 a foot.
Sale #2: 910-930 K Street. These vacant buildings have sat on the market for at least 5 years. Total site consists of 20,909 s.f of land with 31,600 S.F. of buildings. The property sold for $5.3 million. That equates to roughly $250 per square foot of land and $167 per square foot of building area. For comparison, 770 L Street sold for $173 per square foot. The Class A office building contains 169,000 square feet and was 90% occupied at the time of sale.
Sale #3: 915 Broadway. This 15,400 S.F. building sitting on 1.8 acres sold for $2,600,000. Land Park residents will be pleased once The Kitchen opens up here. The Kitchen has been located off of Hurley Way for decades, and is now moving into the Core.
A Strong Outlook for the Urban Core
These sales reflect the direction of the Core and the strength of current market demand. That does not mean a $100-per-square-foot property will suddenly sell for $150 per square foot. However, it does support a positive outlook for future values.