Shorenstein acquired 621 Capitol Mall for over $400 a foot in early 2018.

Institutional and Out-of-Town Investors Create Value with Perspective

Sacramento office investment sales are up. And the majority of investors are institutional and from out of town. Sacramento has always been considered a second tier market, but it seems that second tier markets are where all the Easter eggs are! Is it really almost Easter?

Institutional and out-of-town investors create value with perspective. Example: Seagate Properties from San Rafael recently bought the Senator Hotel Office building in downtown Sacramento. The lease rates have been increased significantly, but from Seagate’s perspective, the rates are still below many markets in the country. Seagate can also rationalize additional improvements such as a gym and a restaurant.

Research indicates that a record amount of investment capital held by private equity real estate funds is close to $300 billion. The current state of the market is also responsible for an institutional increase in real estate investments as new and existing investors are looking to lock in historically low interest rates.

Randle Communications

As the market cycle matures, office vacancies are expected to bump up to 13.6% nationally in 2020; presently the number sits at 13.2%. Rent growth is also slowing. So investors seeking higher yields, are looking to buy in secondary Markets and non-Gateway markets. Gateway Markets include San Francisco and New York and have historically attracted foreign capital funding.  A recent study seeking to quantify the top 10 office investment markets in the country included only two primary markets – Chicago and Manhattan. Please take a look at this article from CCIM Magazine, https://bit.ly/2U3ojgD

The Urban CORE is not the only place investors are looking. Institutional investments in Sacramento’s suburban markets like Roseville, Rancho Cordova, Folsom and North Natomas have seen a significant uptick. According to Real Capital Analytics, nationally Suburban cap rates are averaging at 6.8 percent, compared to 5.5 percent for central business districts. Investors are also looking to invest in second tier markets like Sacramento due to sustained demand, improved transportation infrastructure and local amenities. Sacramento is no longer a secret, and prices are showing it.

Take a look at this recent article in The CCIM Magazine for more information: https://bit.ly/2U3ojgD

Looking in Sacramento? Give us a call at (916) 930-0001! We have recently sold a few properties, so if you are thinking about selling, we would welcome the opportunity to help you with the decision making process.

Tags: No tags

Leave a Comment