By Razvan Cimpean
Development of office space dropped in Sacramento in the past few years, with no new deliveries in 2014 and 2015. The following two years witnessed some development activity, but at a level nowhere near the pre-recession era. Thus, it comes as no surprise that the office inventory of all the owners on our list was completed before 2010. However, transaction activity was steady in the last few years, with suburban submarkets seeing the most significant surge in deal volume since 2014. Moreover, as tenants look for cheaper alternatives to Los Angeles or San Francisco, the Sacramento office market gains momentum.
This list highlights the metro’s top 10 private, REIT and institutional investor office owners, based on square footage, according to Yardi Matrix data. The total number includes only projects larger than 50,000 square feet, that were completed or were under construction as of January 2018.
10. The RMR Group
The Newton, Mass.-based REIT owns seven Sacramento properties totaling nearly 1 million square feet. Nationwide, The RMR Group ranks as the second largest of the 10 companies included in our list, with a portfolio of 247 office properties (36.5 million square feet). In 2016, the REIT paid $80 million to acquire the LEED-certified Renaissance Tower at 801 K St. from USAA Real Estate Co. At the end of the same year, the company also purchased an 83,000-square-foot office building at 11020 Sun Center Drive in Rancho Cordova from an individual investor for $10 million.
9. Ethan Conrad Properties
Ethan Conrad Properties owns and manages 13 office properties, all in Sacramento, totaling nearly 1.1 million square feet. Last year, the local company acquired a 170,000-square-foot campus at 1111 Howe Ave. from Karlin Real Estate for $10 million. The previous year, in separate deals, Ethan Conrad purchased One Capital Center, a 124,000-square-foot office mid-rise situated at 3100 Zinfandel Drive in Rancho Cordova, Calif., and California Center, a 119,000-square-foot building at 8880 Cal Center Drive in Sacramento. These assets rank as the company’s largest properties.
With only six properties in the metro, AKT owns 1.2 million square feet of office space. The company acquired its largest asset—Cannery Business Park—in 2006 from an individual investor. The six-building complex was completed in phases for industrial use in 1975, 1994 and 2008 and later converted to office. In 2004, AKT purchased Esquire Tower, a 248,000-square-foot high-rise, from Lankford & Associates for $70 million. The same year, the Sacramento-based firm bought the nearby Meridian Plaza, a 229,000-square-foot asset, from The Allen Group for $75 million.
7. Basin Street Properties
The Nevada-based firm owns 10 office properties in Sacramento totaling 1.2 million square feet, and DivcoWest is the manager for half of them. Basin expanded its local portfolio in January with the acquisition of the five-building, 546,479-square-foot Prospect Green campus from DivcoWest for $58 million. In 2016, in a deal with USAA Real Estate Co., the firm purchased the LEED-certified, two-building Harvard Corporate Center for $19.2 million. Basin plans to expand the 305,000-square-foot campus with two new phases totaling 253,750 square feet.
CalPERS owns three urban office properties in Sacramento totaling about 1.25 million square feet. The 528,000-square-foot Lincoln Plaza East & West, located at 400 Q St., ranks as CalPERS’ largest completed property in the metro. Built in 2005, the two-building mid-rise development includes 25,000 square feet of retail space and 1,000 parking spaces. Situated nearby, at 400 P St., is CalPERS’ Lincoln Plaza North, a 492,900-square-foot property completed in 1986 and renovated in 2010 and 2014. The local company has plans to build 301 Capitol Mall, a downtown mixed-use high-rise.
5. Pappas Investments
After expanding its Sacramento portfolio last year, with the acquisition of two office assets from KBS Realty Advisors, Pappas Investments currently has eight properties in the metro, totaling nearly 1.4 million square feet. The two properties the company purchased in 2017 are part of the Gateway Corporate Center and are located at 160 and 180 Promenade Circle. Pappas Investments also has plans to add three new buildings: Eureka Gateway Medical Office Building in Roseville, the fourth phase of Laguna Springs Corporate Center, as well as Big Horn Professional Center in Elk Grove.
4. The Buzz Oates Group of Cos.
Coming in at No. 4 is the local Buzz Oates Group of Cos., which has 13 office properties in the metro, a little more than 1.5 million square feet. In 2014, the firm acquired Plaza 555, a 16-story building in downtown Sacramento from Teichert Construction for $63.1 million. Completed in 1970, the 376,000-square-foot asset was renovated in 2002 and 2004. Currently, the company awaits city permits for the 110,000-square-foot Riverpoint Corporate Center, located at 700 Riverpoint Drive in West Sacramento.
3. Kaiser Permanente
Although only the third largest Sacramento office company in terms of office square footage, the Oakland-based firm has about 190 office properties nationwide (24 million square feet). The company owns and operates 13 Sacramento office properties totaling a little less than 1.6 million square feet. Kaiser Permanente expanded its local portfolio in 2016 with the acquisition of 2155 Iron Point Road in Folsom, a 125,000-square-foot office building, from Stoneridge Realty & Investment for $21.5 million, which it converted to medical use. Currently, the firm awaits city approvals and final plans for Cibry Medical Office Building, a 210,000-square-foot property at 1001 Riverside Ave. in Roseville. The five-story building is set to include 16,000 square feet of retail space.
The largest company on this list, Hines has a national portfolio of more than 160 office properties totaling 47.8 million square feet. In Sacramento, the San Francisco-based firm has nine buildings and a total of nearly 1.9 million square feet. Last year, Hines paid $120.5 million to purchase Park Tower, a 447,000-square-foot Sacramento office building at 980 Ninth St. from CIM Group. The previous year, the company expanded its Sacramento footprint with the acquisition of Prospect Park Center, a 163,000-square-foot office mid-rise in Rancho Cordova, and the 60,000-square-foot building of Crown Corporate Center, located at 2890 Gateway Oaks Drive, for $30.3 million.
1. California Department of General Services
With 15 properties totaling 8.1 million square feet, the government agency has four times more office square footage than Hines. The California Department of General Services’ largest property is the 1.8 million-square-foot Franchise Tax Board Office Complex, completed in phases in 1984, 2002 and 2005. The seven-building campus is LEED Gold and includes 57,000 square feet of industrial space, solar panels and more than 3,500 parking spaces. The agency also plans to develop O Street Building, a 360,000-square-foot high-rise.
Images courtesy of Yardi Matrix