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Rotary is not Just Lunch

Rotary Is Not Just Lunch

Sacramento Rotary currently has about 300 members. Worldwide there are over 1.2 million Rotarians. Rotary International is tackling Polio, helping impoverished villages in third world countries build irrigation infrastructure and teaching children to read.  In Sacramento, since the 1920s, Rotary has been helping many deserving charities. Today we are in the midst of a significant fundraiser for the Sacramento Children’s Home Crisis Nursery. The Crisis Nursery has been helping families in distress since 1867. Here is a story about one family the Crisis Nursery helped:

“Brittany”
“Brittany called the Crisis Nursery in desperation. She had come to Sacramento to make a fresh start only to have her housing fall through. None of Brittany’s friends in the area were able to take her or her two young children in. Thankfully, the Crisis Nursery was there to give her kids a safe, nurturing place to stay while she worked to better her situation. The kids especially enjoyed playing outside, riding in the wagon, and drawing with chalk. Brittany visited her children often while she searched for permanent child care and a new home, spending quality time with her kids whenever she could. Meanwhile, Crisis Nursery staff put Brittany in touch with vital community resources to help her find safe, stable housing. At the end of the kids’ stay, Brittany was overjoyed to have the children come to their new home. She was ready to begin her new life in Sacramento, and she thanked the Crisis Nursery staff for taking such good care of her children in her time of need.”

Not everyone can join Rotary, but I am amazed how many people contribute to Rotary’s causes, particularly the Crisis Nursery. On October 6th Sacramento Rotary is hosting The Sacramento Century in Downtown Sacramento. All the proceeds are earmarked for the Sacramento Children’s Home Crisis Nursery. If you would like to contribute, it is not too late to sign up for the ride. If you are not quite ready to hop on the bike, you can contribute to the cause by clicking on this link: Donate to the Crisis Nursery

While Rotary is not my day job, I really enjoy helping disadvantaged youth, sharing lunch with many of Sacramento’s leaders and participating in a variety of fun events that Rotary sponsors.  Rotary is a daily reminder how lucky we all are, and Rotary gives us the opportunity to help others that may not be so well off.

See you October 6th!

Calpers HQ - Sacramento CA

Go Green or Go Home

Go Green or Go Home!   Being from California, going Green is not longer optional. From 1978 for residential – and 1980 for non-residential – the EPA has gradually accelerated the energy regulations around new construction. These regulations are Title 24. The Code for all the regulations is Title 24 http://www.energy.ca.gov/title24/

The original intent of Title 24 was to conserve energy, but not to save money. As the years have gone by, the Code has evolved to dramatically increase the cost of construction. Why does California need Standards? Energy savings comes to mind, and for commercial buildings (office, industrial, tech etc,) the two biggest components for energy consumption (potential savings) are HVAC and Lighting.

Many of the regulations, while innovative, may not pencil for developers. And when things don’t pencil either rents go up or things don’t get built.   For example when planning a tenant space, Title 24 calls for “Light Harvesting” which mandates that all lighting is calibrated to turn off when no one is in a portion of the space. Take it a step further, you have to consider the orbit of the earth; based on the position of the sun (consider the afternoon sun shining on your windows) HVAC and lighting can be adjusted to turn off or throttle down.

You may remember the 2000/2001 energy crisis in California. Since then, the Energy Commission has placed more emphasis on energy consumption. Building components that Title 24 covers is all encompassing – from the envelop – to the guts of the building. The other goals for Title 24 are:

  • Comfort- Efficient buildings are more comfortable for the occupants and the delivery of light, heating and cooling is much more consistent throughout your premises.
  • Economics- In the early years much of Title 24 was a nuisance and big energy saving improvements didn’t really pencil. That has changed dramatically as technology, particularly in Solar, has improved.
  • The Environment
  • Curtailment of greenhouse gases

Many tenants considering new locations will give environmentally friendly, energy efficient buildings “points” in their property selection matrix.  It just feels good, and potential employees and clients take notice.

If you are a tenant looking at moving into a new location that needs significant Tenant Improvements within previously occupied space be aware: If the building you are looking at is older, it is possible that it may not be in compliance with current ADA or Energy codes. So, when the Landlord goes to pull a permit for the construction of the tenant improvements, the City Planning Department could require the Landlord to comply. This can be costly since it adds to the scope of work. Sometimes, as much as a Landlord wants a new tenant, the Landlord may decide to pass on a tenant that requires significant tenant improvements. They will just wait for a tenant that doesn’t need tenant improvements. So, it is better to figure this out in the initial stages of a negotiation rather than waiting until you are about to sign a lease.

Sacramento’s CORE: Par, Birdie, Eagle. Albatross next?

Sacramento’s Core (Midtown and Downtown) is not very sneaky. In fact the whole world has taken notice.  One thing I didn’t now about Core is this:  Core recently took up golf, and in 2015 made the PGA Tour.    In a matter of months, Core has risen to the top of the money list!  At the  2016 Player’s Championship, Core was interviewed after a remarkable 3rd Round, and he shed some light on his success.

Reporter:  So Core, how do you feel about your round today?

Core:  Well, I gotta tell you, I don’t think I can hit the ball much better.  The first day, I played alright, but I was still working out the kinks, you know, past few years have been tough.

Reporter:  I noticed that.  Your first round you scraped it around and managed to keep yourself in the hunt.  But then you really turned it on.  What do you attribute to your resiliency and significant bounce back?

Core:  Well before I picked up my new coach….

Reporter:  Your new coach?

Core:  You know, they call him (pause) The Golden One.  (smiling) I call him GO.

Reporter:  How could I forget?  He has been a big part of your rise to the top of the money list, huh?

Core:  No doubt.  I was making progress with my trainer, HDR, and my previous coach, Trend..  But when GO showed up, things really started to click.

Reporter: So what do you see for the final round tomorrow?

Core:  I can’t imagine going as low as I did today, heck, I only had 16 putts.  But I feel pretty good. I am looking forward to solid final round.

Reporter:  Thanks, Core.  Good Luck Tomorrow!

With the exception of some notable deals, like the sale of the Wells Fargo Center, it doesn’t take a brain surgeon to note that values are up in Midtown and Downtown.  In looking at the statistics (Costar) for 2014 through 2016 here are the basics:

Commercial (non residential) properties sold for an average of $99 a square foot in 2014, $151 in 2015, and in 2016 the average price per square foot increased to $205 a foot.

Multifamily properties sold for an average of $95,000 per unit in 2014 with a GRM of 10.92. In 2015 the price per units edged up to $116,000 per unit with the GRM jumping to 13.15. In 2016 the Price per unit increased to $150,000 per unit with a GRM of 13.32.

Land sold for an average of $94 per square foot in 2014. In 2016 the average increased to $131 per square foot.

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The Ransahoff (11th & K)

This survey is only for properties selling between $1,000,000 to $10,000,000.  The price increases are not surprising given the development of the arena and the trend of people wanting to live in the Midtown and Downtown area.  However, I think you can say that a 50% increase in the price of Multifamily (price per unit) from 2015 to 2016 is more of a spike than a bump.  Notable: the Gross Rent Multiplier (GRM)increased nominally between 2015 and 2016.  This means rents escalated significantly in 2016, nearly in step with the values.

Many of the commercial properties sold (non-residential) in the midtown area were to users.  For quality properties with parking, the prices exceeded the median significantly.

Land sales have picked up considerably as well, and values are up at least 5o% from 2014.

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R Street’s Ice Blocks

For detailed Sales and leasing information including sales comps for 2016,  contact Tom Bacon at 916-761-1202 or tbacon@kiddermathews.com.

sacramento at night

Greater Sacramento Economic Council – Sacramento’s CEO

The Greater Sacramento Economic Council (GSEC) invited a select group of commercial real estate brokers over to their office last night.  Barry Broome, President and CEO, laid out GSEC’s game plan.  The first step, which seems to be coming to a close, has been to get organized and get a lay of the land. GSEC understands the political landscape better understood and they acknowledge the challenges and as well as the appeal of Sacramento.  For example, we are in California, the greatest state in the country.  Part of the reason it is such a great state is because there multiple regulations to maintain the environment and provide services.  But with regulation comes costs that make it difficult for companies to locate certain components of their enterprises here.  Barry pointed out that the costs (relative to employee salaries) to develop back offices, like a call center, are too expensive in California.  So, guess what?  GSEC will not be spending a lot of time trying to attract back offices to Sacramento.  Their focus is on higher paying jobs such as engineering, IT and Life Science.

The Sacramento Region is adorned with an outstanding educational system that is producing a terrific labor force with higher paying jobs in IT, engineering, Life Sciences and Agriculture.  The problem, as Barry noted, is that the outside world still considers Sacramento a Cowtown.  Well you know what I say? “More Cowbell!”  GSEC has commenced an aggressive multi-media marketing campaign that is transforming Sacramento’s meaning to the outside world.

The other key take away is that GSEC is not just a promoter of the Sacramento Region, it is a collaborator with the Bay Area to compete as a “Mega Region” to keep and attract jobs in California.  This is a huge paradigm shift in thinking.

And while GSEC is working with the Bay Area Economic Council to promote our Mega Region, GSEC is coordinating a cooperative effort with all the municipalities in our region.  Unifying the the region to compete and make it a more business friendly place to be.  The first initiative is to reduce the time and expense to get something built.  There is no reason it should be difficult open up shop in Sacramento.  Let’s lay out the red carpet, and let the the world know that Sacramento is open for business.  With the Greater Sacramento Economic Council, this message is clear and beginning to reverberate, everywhere.

So if you are interested in the region and need some information about commercial real estate, I would be happy to help!