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 on Urban Land Value. Believe it or not, the demand for properties is going to increase and sustain itself so long as the trend for migration into the Core continues.
When the Arena was announced, overnight, property values in the vicinity of the site went up at least 25%. Buildings like 555 Capitol Mall, 501 J Street, The Travelers Hotel Office building and the former Greyhound Bus Station are just a few examples. For Sacramento, the Arena changes everything; consider this blog post written over two years ago comparing The Golden 1 Arena to San Diego’s Petco Park: Sacramento Kings Arena.
Midtown hasn’t needed the Arena to take off. For too many years rents have been suppressed in this market, and as new developments come on line, the rents will be commensurate with Midtown’s value proposition and Vibe. All the new residential development coupled with the New Sutter Hospital and developments like Whole Foods at 20th and L Street. Land is selling, and more land is sure to trade hands in an accelerated pace the next three years.
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. PRICE: $5,300,000, which pegs the underlying land value at $250 a square foot and $167 a foot for the vacant single story buildings. To put this in perspective, just one block away 770 L Street, a 169,000 square foot (90% occupied) class A office building sold for $173 a foot.
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.
These sales listed above are notable examples of properties that have sold at exceptional values, values that reflect where our Core is heading. This doesn’t mean that a property worth a $100 a foot is going to immediately sell for $150 a foot, but it certainly builds a solid case for optimism and positive momentum.