While sales volume is off in Sacramento, deals are getting done. Looking at what has been selling in Sacramento, two things became clear:
Cap rates have increased across the board for investment properties.
Some property types like class B multifamily, triple net (NNN) deals, and medical have been more resilient while office and development have suffered. But not all offices are created equal. In fact, user-driven deals for smaller properties held-up well, even with increased interest rates.
Elective Surgery is being put off until next year.
If a deal doesn’t have to happen, it probably won’t. Since early 2023, most development deals haven’t penciled, which has left several projects on hold until construction costs and interest rates go down.
So, What Sold in Midtown and Downtown?
In 2023, the majority of sales in Midtown and downtown were user driven or an investor needed to exchange to defer capital gains taxes. Below are a few properties that were sold in 2023.
2701 K Street
In November, this 7382 SF office building sold for $1,442,500 ($195/SF). Originally built in 1960, the building underwent renovations in 2015, including installing an elevator. At the time of sale, the property was 100% leased. The buyer was in an exchange. The last sale was in July 2014 for $1,045,000 ($142/SF).
1011 22nd Street
On November 3rd, this Class B office building at 1011 22nd St in Midtown sold for $1,073,000 (over $300/SF). The property had been on the market for 2 months and was listed with an initial asking price of $1,100,000. While BCRE did not represent the seller, Bacon CRE represented the tenant who had to move out. They relocated to a newer property and significantly reduced their costs. 1992 the building sold for $487,000 ($141/SF).
2700 J Street
In October, 2700 J St sold for $4 million ($266/SF). The Miwok Indian Tribe bought the property and intends to open a cultural center on the ground floor. The building consists of 14,995 SF and was once home to the advertising firm, Glass McClure. The property previously traded hands in 2019 for $4 million.
1507 21st Street
After sitting on the market for 3 years, this 55,906 SF office building sold on October 19th to One Community Health for $9.4 million. The property was vacant at the time of sale. The property takes up half a city block and is conveniently located close to other facilities owned by One Community Health.
3030 Capitol Ave
On October 12th, this 3,580 SF restaurant building sold for $2,320,000 ($648/SF.) Habit Burger is committed under a long term NNN lease. The buyer had sold a vacant restaurant building and traded into this property. The building traded hands in early 2021 for $1 million ($279.33/SF.)
5901 Broadway
After 3 months on the market, this 10,700 SF property sold on October 1st for $1,750,000 ($163/SF.) Fully occupied at the time of sale, the buyer was drawn to the 10,696 SF retail center as an investment purchase. Previously, in 2013, the property sold for $540,000 ($50.49/SF).
2000 I Street
Built in 1915 and renovated in 2011, this 6,400 SF retail building sold on September 29th for $1,550,000 ($242/SF). Listed with an initial asking price of $1.8 million, the property was on the market for 11 months. The buyer was drawn to the property because of its proximity to other investment properties. The property is currently available for lease. The property’s last sale occurred in 2004 for $560,000 ($87.50/SF).
1201 R Street
Previously occupied by Shoki Ramen, this 1,140 SF restaurant building sold on September 14th for $750,000 ($657.89/SF). The owner also owns an adjacent parcel with a duplex and combined, the two properties amount to over 12,000 SF.
1730 I Street
On September 8th, this 20,186 SF office building in Midtown sold for $5.8 million ($287.33/SF). Listed with an initial asking price of $6.5 million, it was on the market for over four years and was 100% occupied at the time of sale by 5 different tenants. The buyer owns a property on the same block and hopes to expand their local footprint with this purchase. 2007, it sold for $4,750,000 ($235.31/SF).
2400 22nd Street
In August, this 9,157 SF office building sold for $1,380,000 ($150./SF). The property was 49% occupied at the time of sale, and the new owner will occupy the ground floor. The property was on the market for 2 years with an initial asking price of $1.55 million. It had previously sold in 2013 for $925,000 ($101.02/SF).
Bacon CRE represented the buyer. The lending climate at the time of acquisition was challenging – The buyer was denied a loan. Bacon CRE insisted that US Bank should take another look at the deal. Long story short, Kimberly Bird of US Bank helped carry the ball over the goal line. Mike Lucca and Nellie Cruz of CBRE did a great job as well.
1924 – 1930 T Street
Built in 1966, this 15,900 SF commercial building sold on August 3rd for $2.2 million ($138.36/SF). Purchased as a housing development site, the existing building will be demolished, and two new multi-family buildings will take its place on the .61 acre plot of land. The price worked out to approximately $74/SF for the land. Two years prior, the property sold for $2.1 million ($132.08/SF).
1820 L Street
This 3,744 SF retail condo located in the Lofts on L Street sold in July for $2,065,000 ($551.55/SF). Listed with an initial asking price of $2.2 million, the REO property was on the market for 6 months prior to the sale.
Previously, a portfolio sale of 2 properties sold for $2 million ($767.17/SF; $16,469/Unit) in December of 2017. In the spring of 2012, the building changed hands for $21.5 million ($162.44/SF; $311,594/Unit).
2230 K Street
Bacon CRE facilitated the sale of this 2,942 SF office building in July for $800,000 ($271.92/SF). Listed with an initial asking price of $850,000, the property was on the market for 7 months. The buyer plans to return this early 1900s Victorian building to residential use.
Brian Baraga of Guide Real Estate represented the buyer and was instrumental in getting the deal done!
315 12th Street
This 7,140 SF class B flex building sold on July 7th for $1,275,000 ($178.57/SF). The property was on the market for 11 months with an initial asking price of $1,480,000. Built in 1994 and renovated in 2016, the last sale occurred in 2020 for $850,000 ($119.05/SF).
2007 O Street
This 9,800-square-foot office building was sold on July 5th for $1,950,000 ($198.98/ SF). The property was on the market for 10 months with an initial asking price of $2,009,000.
This Midtown property is already back on sale with a listing price of $2,250,000.
1001 – 1015 Front St
This 17,955 SF retail building sold on July 5th for $1,850,000 ($103/ SF). The property was on the market for 3.5 years and was listed with an initial asking price of $2,250,000. The buyer plans to operate a restaurant out of this property. Over half the building is an improved basement.
2000 K Street
On June 20th, Bacon CRE facilitated the sale of this 12,400 SF Bar/Nightclub Building for $1,750,000 ($141.13/SF). The purchase price was at least 30% below market due to a below-market lease, which still had 35 years remaining on the lease term. While the market rate for monthly rent could be estimated at $20,000+, the lease in place was less than $8,000 a month.
Moral of the Story – If you can secure a longstanding, below-market lease as a tenant, you have instantly created equity for yourself.
710-712 12th Street (12th and G)
On May 11th, this 6,400-square-foot office building sold for $1,650,000 ($258/SF). Located on .15 acres, the building was built in 1929 and was on the market for 6 months before the sale. The last sale occurred in October 2019 for $945,000 ($147.66/SF).
This building was acquired by an owner-user. Frankly, the purchase price doesn’t pencil based on investment value, but it probably makes sense for the new owner because they will now have control over their offices, and over time, the equity will grow.
1815 K Street
On April 27th, this 3,600 SF restaurant building, the Porch Restaurant, sold for $2,200,000 ($611/SF). Built in 2002, the property is on .15 acres and includes 20 parking spaces. While the price seems high per SF, the property is at an A location, and the building is small. Smaller buildings garner significantly higher prices on a per-square-foot basis.
4900- 4922 Folsom Blvd
On April 21st, the instantly recognizable Burr’s Fountain building sold for $1,400,000 ($821.11 /SF). Built in 1956, the 1,705 SF building sits on 0.367 acres and includes 29 parking spaces. The price works out to $87/SF on a land value basis. No redevelopment is planned at this time. If you happen to shop at Trader Joes, you may have even used the parking lot!
1228-1230 H Street
On April 13th, this 10,640 SF office/residential building sold for $850,000 ($80/SF). Built in 1985, the .15 acre property includes 5 parking spaces. The property was previously sold for $1,050,000 ($98.68/SF) in the fall of 2018.
5207 J Street
On April 7th, this 4,644 SF medical building sold for $1,125,000 ($242/SF) after being on the market for 584 days. Built in 1965, the property sits on .16 acres in a great location. Actually, this was a decent deal for the buyer, even if they weren’t a user.
1001 G Street
After 146 days on the market, this 16,685 SF office building sold for $2,375,000 ($142/SF) on March 30th. Vacant office buildings don’t sell too fast unless a user wants to move in. The real appeal of this property was the .48-acre lot. Previously, the property sold for $2,658,412 ($159.33/SF) in September of 2022.
1016-1022 K Street
On March 29th, this 24,000 SF restaurant building sold for $4,950,000 ($206/SF). The property had a capitalization rate of 7.90% at the time of sale, with a net income of $391,050. A 1031 exchange sale condition influenced the price, but if this sale had occurred before Covid and the subsequent rate hikes, the property probably would have sold for $500,000 more. The Downtown core is still struggling, and until we see more bodies downtown (State of CA employees), but until then, values will remain lower.
Pizza Rock is a great pizza place, and we all know that the best-performing type of restaurant in Sacramento during COVID-19 must be a Pizza Pie purveyor.
1831 V Street
On March 24th, this 9000 SF building sold for $1 million ($233/SF). Built in 1971, the property is located on 12,800 SF. This property will likely be a repurposed development. The building includes an art studio a furniture store, and an office tenant..
Shortly after the sale closed, the office user bought a new building and moved out in January 2024.
2101 16th Street
On January 27th, this 514 SF Mexican restaurant sold for $1,100,000 ($2,140.08/SF). The building sits on a 6400 SF lot in a corner of the primary surface street leading to the CBD. Based on the sales price, the land sold for approx. $171/SF. This price seems steep, which is reflected in their breakfast burrito price.
1705 1715 I Street
On January 13th, this 17,883 SF freestanding commercial building sold for $5,000,000 ($279.60/SF) in an investment deal. Built in 1972, the property sits on half an acre, and is currently being marketed for lease.
In July 2019, D&S bought this property for $190/SF. SKK development arranged for the property to be acquired by Sacramento Turnverein. But it was really just a property swap for a property that Turnverin owned at 17th and J St. The 17th and J Property is being combined with the northwest corner of 16th and J Street so that SKK can build a larger mixed-use development that includes Whole Foods. See information about 1617 J St below.
1617 J Street
On January 13th, SKK Development acquired a 50,000-square-foot parcel for a multi-family development site located at 1617 J St for about $9 million. This is the total paid for the entire site, but the acquisition was completed in phases.
Public record shows that on the same date, the same principals entered into a transaction on what looks like a direct exchange on the sale of SKK property located at 1705-1715 I St for $5 million.
1613 and 1615 J Street
While we are at it, this 6,400 SF restaurant building is the other parcel referred to in the sale to Turn Verin. 1613 – 1615 J St, was sold on January 13th for $4,236,500 ($661.95/SF). The building sits on a 0.24-acre parcel zoned C-2-SPD. On the same date, the buyer also acquired the contiguous property, 1617 J St, east of the subject, from a different seller (See 1617 J Purchase above). This transaction appears to be an assemblage of the two properties to redevelop. Building permits have been filed for a seven-story 198-unit residential development.
1009-1023 J Street
This 32,000 SF office building sold in December 2022 for $2,753,602 ($86.05/SF), while the land at 1023 J St sold for $7M. The multi-property sale consisted of five parcels, all zoned C-3-SPD. The buyer intends to redevelop the site into a class-A apartment site.
There is a plan under review Planning Review to construct an eight-story mixed-use building with 256 dwelling units across five parcels approx. 0.96 acres in the Central Business District Zone (C-3-SPD) within the Central Core Design Review Area and Central City Special Planning District.
2300 N Street
This 3,600 SF office building was sold on December 15th, 2022, for $1,065,000 ($295/SF). No conditions affected the sale price, and the buyer will occupy a portion of the building as an owner-user. The property was previously sold in January of 2021 for $1,020,000 ($283.33/SF).