Business & Real Estate

Downtown arena, housing market rebound, VW scandal top local business stories of 2016

Developer Paul Petrovich waits to speak to the City Council before it rejected his proposal to add a gas station to the Safeway planned for Crocker Village.
Developer Paul Petrovich waits to speak to the City Council before it rejected his proposal to add a gas station to the Safeway planned for Crocker Village. Sacramento Bee file

The opening of a palatial, technology-laden arena that many would have been considered a grandiose pipe dream just a few years ago. The resurgence of a housing market from the depths of a meltdown during the recession. The continued, prominent role of a state agency in one of the biggest automotive scandals in a generation.

These were among the top business stories in the Sacramento area in 2016.

Golden 1 Center draws national attention

The $558 million Golden 1 Center opened Oct. 4 with a glitzy, sold-out concert by rock legend Paul McCartney. Not only did the arena become the shining centerpiece of the city’s only major professional sports franchise, the Sacramento Kings, the Golden 1 Center emerged as the driver of downtown development.

Next summer, the 16-story hotel and condo tower, known as the Sawyer, is scheduled to open immediately north of the arena. The hotel is a key component of a planned $500 million redevelopment of the old Downtown Plaza.

The arena’s impact goes beyond lodgings, restaurants and retail shops, however. Local officials say the Golden 1 Center has already become a bragging point for Sacramento.

“When we talked to national media about Sacramento in the past, we talked about the Crocker (Art Museum), the climate, the great airport. Now they ask us about the Golden 1 Center,” said Mike Testa, chief operating officer of Visit California, the Sacramento-based nonprofit group that helps develop the state’s tourism marketing programs. “It’s helped put Sacramento on the map from a national standpoint.”

Area housing market rebounds, heats up

The greater Sacramento housing market rallied as well, with robust consumer demand amid limited inventory and median sale prices edging up to pre-recession levels.

The rising tide was evident in March, when the median price for a resale home in Sacramento County rose to $295,000, an 11 percent increase from March 2015 and the highest median since the fall of 2007, according to Irvine-based market tracker CoreLogic. By September, the countywide median was up to $310,000, and local real estate brokerages were noting intense buyer interest amid a low inventory of available homes.

In late November, predicted that the greater Sacramento area will be the nation's fourth-hottest housing market in 2017 – as measured by price appreciation and growth in sales volume – trailing only Phoenix, Los Angeles and Boston in rankings of the 100 largest metro areas. cited the Sacramento area’s relative affordability, job growth and recent increase in home sales volume.

Local brokerages weren’t necessarily ready to lock in Sacramento at the top of the national list, but said they liked the prospects for 2017

“There is no doubt that greater Sacramento remains one of the hottest housing markets in the country,” said Pat Shea, president of Sacramento’s Lyon Real Estate. “Buyer demand and the rapid rate of sales show no indication that a cooling is anywhere in sight. The anticipated bump in mortgage rates may be fanning the fourth-quarter flames, but rest assured that our housing market heat will remain on high for 2017.”

California’s role in VW scandal

In autumn 2015, the automotive world was rocked by the announcement that Volkswagen had rigged diesel cars sold since 2009 to cheat on air pollution tests, a major bombshell in California, long the national focal point for strict emissions standards. Engineers at the California Air Resources Board testing lab in El Monte, following up on research from a team of West Virginia University scientists, determined that the cars were equipped with “defeat device” software designed to evade pollution tests.

Throughout 2016, the ARB remained in the spotlight of developments that dealt a massive financial blow to the international automaker.

On Oct. 25, a federal judge in San Francisco approval a $14.7 billion settlement, paving the way for mass buybacks and cash payments to nearly a half-million Volkswagen owners nationwide. Just last Tuesday, VW agreed to buy back more tainted diesel cars and spend an additional $1 billion to settle the air pollution scandal. The German automaker will pay $225 million into a “national mitigation fund” to address air pollution effects from its tainted 3-liter engine vehicles. The ARB said $66 million will go to California.

Len Brewster, a Detroit-based auto industry analyst, called the VW emissions-cheating scandal and the ARB’s role in exposing it “one of the most sensational auto industry stories of the past 50 years … right out of a Hollywood script.”

Regional development saw highs and lows

Development also made headlines locally in 2016, and stories ran the gamut – from positive to promising to confrontational.

Growth continued along Sacramento’s R Street corridor, including the opening of the new, 46,000-square-foot Sacramento Natural Foods Co-Op at 28th and R streets in October. Shortly after that, West Sacramento-based Raley’s announced plans to construct a new natural foods supermarket in a former office furniture store at 10th and R streets. The 11,000-square-foot concept, dubbed Market 5-ONE-5, was described as an indoor farmers market devised by Raley's President and CEO Michael Teel.

In the spring, developer Mike Heller offered up plans for two modern glass-and-metal structures on the ground formerly occupied by the Crystal Ice and Cold Storage building at 16th and R streets. A November 2015 fire gutted the long-closed ice plant. Heller’s plans are part of a larger proposal to build housing, restaurants and office space along two blocks of R Street.

In September, the long-anticipated McKinley Village near East Sacramento opened to visitors to view the first of 336 homes planned for construction over the next three years. The development sandwiched between Capital City Freeway and an elevated railroad line continues to face opposition from critics concerned about increased traffic and negative environmental impacts.

Throughout 2016, developer Paul Petrovich continued to face headwinds from Curtis Park residents over the shape of development on a 72-acre former railyard between Sacramento City College and Curtis Park. Most objections centered on commercial development at the southern end of the project. Most of the development, dubbed Crocker Village by Petrovich, is residential.

The city of Sacramento also weighed in against Petrovich over whether Safeway should be allowed to build a 16-pump gas station as part of a plan to build a store. After the Sacramento City Council rejected the gas station, Petrovich filed a lawsuit.

Elk Grove was the site of another development battleground in 2016. The Wilton Rancheria Indian tribe wants to build a $400 million casino-hotel complex off Highway 99 at the southern edge of the city, but Emeryville-based Knighted Ventures LLC, which has close ties to the owner of two Sacramento-area card rooms, has launched a voter referendum that could kill the project.

Next week: A look ahead at 2017

Mark Glover: 916-321-1184, @markhglover