Sacramento’s office sales market surpassed $500 million in the first quarter of 2020. Then the Pandemic hit.

In the short run, the office market will probably experience an increase in leasing “activity.” However, the activity will probably result in negative net absorption Downtown, while suburban markets will experience minimal positive net absorption. For example, a long-time downtown Law Firm, Kronick Moskovitz just moved from 30,000 s.f. in 400 Capitol Mall into about half the amount of space along the Garden Highway in South Natomas, about 5 minutes north of Downtown. This case illustrates negative absorption for Downtown and positive absorption for South Natomas.

Suburban markets will have instances of negative absorption. For example a 35,000 S.F. company is going to sell their building in a suburban location – and then downsize – to 5,000 square feet. If you happen to be looking for a quality 35,000 s.f. office building in an A location, please contact Bacon Commercial.

In February, Hines fortuitously sold Park Tower at 980 9th Street in downtown, for $120 million ($226 a square foot.) In the same month, 630 K Street consisting of 87,000 square feet sold for $28.1MM ($322 a square foot.) 630 K Street’s price seems high, but the property has a large Starbucks on a long term lease and there was a premium associated with it’s proximity to the Golden One Arena and the potential revenue from identity signage revenue.

Meanwhile In Roseville

Meanwhile, the Roseville Innovation Center (RIC) on Foothills Blvd, consisting of three buildings totaling approximately 550,000 SF sold for about $120 Million. Two of the buildings are Class A and sold for about $250 a foot, while the other single story, Class B Building sold for approximately $202 a square foot. Interestingly, Hewlett Packard is now trying to sublease about 110,000 square feet in the RIC.

So, What About 2021?

Most sales that closed from April through the end of the year were 100% leased Class A buildings with minimal tenant rollover risk. I see this continuing through the first half of 2021.  A big wild card, is demand from the Bay Area.  While companies like Tesla and Oracle are getting out of California, Sacramento is proving to be a very viable place for companies to move or at least establish a secondary location.  Heck, many of the employees are moving here, so why not move the company?  The Bay Area dynamic enhances Sacramento’s value proposition and the commercial real estate market.  Also, I expect that owner user sales should pick up now that companies might have a better sense what their future holds.

For a detailed summary of the significant sales in 2020, please email me at [email protected]. I will send the report!

Happy New Year!