Real Estate News

It’s called Ice Blocks and it’s cool. But it’ll cost you serious money to live there.

The corner of 16th and R streets was for decades a dead zone in the center of Sacramento – a place where homeless campers hunkered in the empty husk of a former ice manufacturing plant.

Now this three-block chunk of midtown is about to open for a more official group of residents – this time occupying some of the priciest apartments in a setting that city officials say represents the emerging new downtown.

The massive Ice Blocks project will open the first of 142 apartments next month, housed in two industrial-looking buildings, to be joined over the coming year by restaurants, stores and offices in a village-like setting. City officials herald Ice Blocks as the kind of mixed-use, live-work-play site they have been pushing for and that downtown needs.

That urban all-in-one lifestyle doesn’t come cheap, though. Studio apartments at 432 square feet will go for $1,450 a month, and developers are asking $2,600 for the largest two-bedroom, two-bath apartments.

Those rents are notably higher than the central city average, which is on the rise and has now hit $1,487 a month for a 781-square-foot, one-bedroom apartment, according to Colliers International and MPF Research. That’s a 6 percent increase since late 2016, continuing Sacramento’s noteworthy trend of some of the steepest rent increases nationally.

City officials say that downtown needs more housing at every price point. For now though, the city is finding it much easier to build premium properties, like Ice Blocks.

“We are scrambling to figure out how to fund affordable housing,” downtown City Councilman Steve Hansen said. “It’s becoming one of the great crises of our time.”

Several dozen community activists called on the City Council on Tuesday night to impose a rent control ordinance.

Mayor Darrell Steinberg said the City Council would conduct a hearing on the city’s escalating rents in the coming weeks. He said low vacancy apartment rates and a “gross under-supply of affordable housing” has left many renters on the brink.

“Everyone agrees we are living through a housing crisis,” he said. “The question I have is what do we do to solve it?”

At the same time, though, Steinberg and other Sacramento leaders have been promoting the region as a landing ground for Bay Area emigres who see rents here as moderate compared to the sky-high cost of living in San Francisco and its surroundings.

The Ice Blocks developers, for their part, point out that their project is distinctive, and that renters there are paying for a lifestyle, not just an apartment.

“We are basing our rents on our overall community experience and amenities,” said Kristin Leon, vice president of operations for Heller Pacific, the developer, with developer Mark Friedman and Sacramento Republic FC principal Kevin Nagle as investors.

Heller is known for transforming a bland state warehouse into the popular MARRS building on 20th Street. The developer approached the Ice Blocks project with the goal of creating a destination with a hip, energetic feel.

“Anybody can build buildings,” Leon said. “It takes forethought to create an experience.”

Amenities at Ice Blocks include a zen garden, a fitness center, a dog wash area, a communal lounge, public art, streets and alleys that can be closed for events. The project developers are talking about calling one “Beer Alley” to send a message that even the side streets might be a party or event site at some point.

A Roseville architecture firm has set up shop in one building. Philz Coffee, a Bay Area transplant, opened on site last week and has been drawing crowds since. A boutique clothing store is expected beneath apartments in another. West Elm furniture store is scheduled to open next year as part of a dramatic glass-walled and cube-shaped retail and office building at 16th and R streets.

Leon said the idea is to create a place where residents have things to do just outside their apartment door, and also that it will attract people from elsewhere to come shop and dine.

Michael Hargis of Lowbrau Bierhalle plans to open a restaurant, Beast + Bounty, with a bocce court in front, and Milk Money, a “gangster-a--” ice cream and donut shop next door this fall. He said he loves the site’s ambience.

“It feels like its own little city within the city,” he said. “The architecture is gorgeous.”

The project is among a handful downtown that are de-emphasizing car use. There are just 100 parking spots on site, and they will be available for lease to both residents and businesses. Based on experience elsewhere in downtown, developers believe they can lease spots to some businesses in the day and some residents at night and weekends.

Some residents likely will have to pay for parking nearby. Others will not own cars. Leon said leasing agents are encouraging renters to consider a lifestyle of biking, walking and taking transit. That will be easier here than almost anywhere else in the region. The project is perched adjacent to a Safeway and a light rail station, a few blocks from state offices and the state Capitol, and a short walk from midtown and downtown entertainment hot spots.

Kaila Wide, a 24-year-old assistant manager at LowBrau, is moving in next month from her family home in Carmichael where she grew up. She’s in love with downtown living, she said, and excited about the energy and personality of the Ice Blocks.

“To me, Ice Blocks is young and upcoming,” she said. “That is the lifestyle I am living. I want to live in a place that reflects me.”

Leon of the Heller development company said the project has a long list of interested potential renters, and said the belief is that apartments will get rented as they open in the next few months. A Bee review of local rents for available apartments near the Ice Blocks area found similar rent levels in that area, which has seen considerable development in the last few years.

 
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A smaller but similarly higher-amenity, higher-rent project in that area, the Powerhouse 16 project, sold out two years ago before it opened its doors. A one-bedroom apartment there was recently listed at $2,350 a month, according to the hotpads website.

A studio apartment in a smaller, older apartment building around the corner is listed on that site at $1,100. And a newly remodeled 1,500-square-foot apartment at 15th and Q was listed at $3,600 a month.

Denton Kelley, one of the developers of the 118-unit Eviva apartment building a few blocks away on 16th Street, said deciding what rents to charge is a bit science, a bit guesswork.

His Eviva project group had to lower rents briefly when leasing sagged, but raised rents again later. Rents there for one- and two-bedroom apartments are in the $1,800 to $2,800 range, and the building is 95 percent occupied, he said.

Kelley said rising rents reflect rising construction costs. That inflation works as long as the Sacramento economy creates a sufficient number of well-paying jobs.

“At some point you hit that threshold” where incomes aren’t enough to pay premium rents, he said. But it’s hard to predict when. “Everyone wants that answer. It is a hard thing forecast. You don’t know until you get there.”

John Shaffer, a multifamily housing analyst for Colliers International in Sacramento, a commercial real estate service, said rising rents throughout the Sacramento metropolitan area simply reflect supply and demand. People typically pay what they can afford, he said. Increasingly, though, renters are spending 40 percent of their income on housing instead of 30 percent more typical in the past, he and Brian Nelson of Colliers said.

In particular, Shaffer and Nelson said, downtown properties have become more desirable since the arrival of the Golden 1 Center arena, restaurants and other amenities, and as more people see urban areas as a lifestyle alternative that allows them to avoid freeway commutes.

“There has been a pent-up demand for that live-work-play atmosphere, that the market has not been able to provide,” Shaffer said.

The Ice Blocks project, if successful, would represent a win for City Hall. Nearly 30 years ago, city officials decided to turn the old R Street warehouse and industrial district into a mixed-use corridor with housing, retail, restaurants and offices, rather than allowing developers to just build office towers that would empty out at night. The Ice Blocks site, which previously housed the Crystal Ice Co., in particular turned out to be contentious. After much debate, the City Council in 1996 rejected a plan by developer Angelo K. Tsakopoulos to build two large office buildings there.

Tsakopoulos at the time called the city’s mixed-use plans for the site ludicrous. “It’ll simply never happen,” he said. “That is not a legitimate site for housing.”

It did take decades, as several City Council members said it would. “This is in a large way the fruition of the dreams of city leaders from 30 years ago,” Councilman Hansen said this week. “It sounds like hyperbole, but it is the epitome of our urban renaissance.”

Tony Bizjak: 916-321-1059, @TonyBizjak

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