Comstock's magazine 0419 - April 2019 - Page 77

| R E A L E STAT E | Getting Real About Real Estate Five Sacramento-area commercial real estate brokers weigh in on the strengths and weaknesses of the region’s market by JORDAN VENEMA S ince former Sacramento Mayor Kevin Johnson an- nounced a 10,000-unit downtown housing initiative in 2015, it seems like all eyes have been on the state of Sacramento’s residential real estate market. With the steady increase of the home prices and rental rates between 2011 and 2018, Sacramento’s housing crisis was the talk of the town. But in 2018, the regional commercial real estate market quietly put up its strongest numbers in the last decade. By all projections, that market should continue on a similar trajecto- ry through 2019, although signs suggest there may be serious hurdles in the future. To find out the strengths and weaknesses of the CRE market in the Sacramento region, Comstock’s spoke with five local brokers to discuss what’s happening in the mar- ket now and what to expect in 2019 and beyond. WHAT TRENDS CURRENTLY DEFINE THE SACRAMENTO MARKET? According the Pew Research Center, since 2016, millennials have made up the largest portion of the U.S. workforce. They will continue to define the market with their preference for non- traditional, green work spaces and a live-play-work lifestyle in urban centers. Alexis Garrett, vice president at JLL, a property consultancy company, says that has resulted in a suburban-to-urban shift among her CRE tenants. “Most of my clients are making this decision for the purpose of providing their employees with a more amenity-rich work environment,” she says. “They see the benefits to being closer to [Downtown Commons], Golden 1 Center and the surrounding new ame- nities particularly to retain and recruit top talent and the new generation of our workforce — that puts a high value on quality of life and urban living.” But the shift isn’t just in workforce, but also work spaces. Nahz Anvary, senior vice president at commercial real estate firm Kidder Mathews, says, “I’m continuing to see companies fit more people into less of- fice space through various design changes in office layouts and just simply allocating less space per em- ployee. And coworking spaces like Urban Hive or Hacker Lab, where individuals and small companies choose to work rather than have their own office space, continue to have much draw and appeal.” Scott Bennett, senior vice president at Colliers International, agrees. He sees the potential to expand almost 600,000 ad- ditional square feet of coworking space across the market. Garrett also predicts coworking spaces will continue to grow. “Today, coworking and flexible space con- sists of less than 1 percent of our total office inventory, but over the next decade, I anticipate this percentage share to increase tenfold,” she says. Another trend, Anvary says, is greener buildings. “As it re- lates to office properties, one trend over the past decade has been toward more sustainability in office environments and building materials, including LED lighting, efficient HVAC sys- tems, better insulation and water conservation. Also, there is a focus on landscape improvements through investments in drought-tolerant landscaping and more efficient irrigation sys- tems,” though it may be motivated by saving on operating costs April 2019 | 77