THE GRID 4
FROM OUR MANAGING DIRECTOR
GREG LEVI REVIEWS 2015 AND
LOOKS BEYOND
How would you sum up the
last 12 months in Sacramento’s
downtown real estate sector?
The last twelve months
has been a steady climb in
occupancy downtown with a
lot of underlying excitement.
The Arena is the big story
downtown. Sacramento’s
downtown has always been just
a place to work. Workers drive
downtown at 8am and leave at
5pm. The tenancy has always
been dominated by the state
government on one side and
law firms and advocacy related
tenants on the other. In the past,
it has been safe to say that no
tenant would choose to locate
in downtown Sacramento unless
they had to. It was simply more
expensive and less convenient
than suburban locations.
In 2015, this balance changed.
Arena construction is in full
swing and scheduled for
completion in Fall 2016. Tenants
are now choosing to relocate
to downtown due to the
perception that it will now be
the true heart of the city.
How are downtown landlords
approaching the current
market? Is there a lot of
competition to bring in big
tenants and how are landlords
differentiating their product?
Landlords are positioning
themselves to push lease rates
higher, while balancing and
maintaining critical occupancy.
Large tenants will need to plan
well in advance of their lease
expiration dates because
Landlords are positioning
they will have little or no
themselves to push lease rates
choices for relocation.
higher while balancing and
This means they will need to
evaluate the market prior to
maintaining critical occupancy.
their notification date for their
natural brick. This has not
renewal options.
yet been a major trend in Class
If lease rates and demand
A downtown Sacramento office
continue to increase, we will
buildings, although it has been
potentially start to see new
in the Bay Area. Driving this
construction, and this entire
dynamic could change. For now, trend is the desire by tenants to
be in a more unique and edgy
large tenants are actually at a
environment for employees.
disadvantage.
The idea is to create an
environment that will attract
What about trends inside
and retain younger talent from
the buildings themselves? Is
the millennial generation.
downtown Sacramento, like
I anticipate national and
many other downtown markets
professional firms located in
on the West Coast — Portland,
Class A office buildings will
San Francisco, Seattle, L.A. —
continue to gravitate toward
seeing greater desire for somore traditional finished look
called ‘creative’ space?
with a bit of an edgy feel.
Creative spaces are starting
to creep into the Class A
downtown office buildings in
Sacramento. In the past, creative
spaces, which consist of non
traditional improvements such
as exposed duct and rafter
ceilings, polished concrete
floors and exposed exterior
walls, have been primarily
developed along the R Street
Corridor and in Midtown. This
concept has done very well in
aged buildings that have some
of these older elements, like
As competition for downtown
office space escalates, how
high do you expect Class A
rents to rise in 2016 above
their current $2.72 PSF mark?
We can expect Downtown
Class A building to continue
to tighten with a decrease
in vacancy to under 8% and
overall asking rates to reach
an historical high of $3.00 on
average. ■