Real Estate News

Midrise construction dominates central Sacramento housing market

Sacramento’s high-rise dreams are giving way to midrise realities.

For years developers have wanted to build soaring residential towers in downtown Sacramento, but the cost of high-rise construction and the down-to-earth prices condominiums can fetch here undercut their efforts.

Today there’s a wave of apartment and condo projects being built or planned with ground-floor shops and restaurants. Most are midrise structures framed with wood, not steel, on top of concrete. Experts say that type of construction is a more cost-effective way to build housing in central Sacramento that also adds to the city’s urban appeal.

“Doing four or five stories of wood on top of a concrete podium makes economic sense,” said architect Gregory Jones, who is planning a new Whole Foods Market on L Street between 20th and 21st streets, with two levels of parking and three floors of apartments on top. “Wood maxes out at five stories. Any taller than that and you’d be into a different structural system.”

European cities such as Paris and Rome have urban cores composed of five- and six-story buildings with businesses on the ground floor and apartments above, he said.

“I think it’s an excellent way to go,” Jones said. “It achieves a certain critical mass so you can have a lot of vitality.”

The Whole Foods project, proposed by local developer Pappas Investments, is the latest in a series of mixed-use midrise projects to come along since the region’s real estate market started turning around two years ago.

It joins 16 Powerhouse, a six-story project at the corner of 16th and P streets that will eventually house local food and drink purveyors Magpie Cafe and Insight Coffee Roasters on the bottom floor and penthouses with 18-foot ceilings and walk-in closets on top, said developer Bay Miry, with Sacramento’s D&S Development. It’s about 75 percent done and expected to be finished in December, Miry said.

The same firm is developing an eight-story tower at 15th and I streets on the site of a former automotive repair shop. The i15 project will include 96 residential units, a rooftop terrace and 5,150 square feet of retail at street level. It’s made from light-gauge metal but isn’t tall enough to trigger the costly requirements of highrise construction, the developer said.

“We’re pushing the envelope as far as the most density and height we feel is doable in Sacramento,” Miry said.

Before the recession, two different developers were preparing to build high-rise residential towers on Capitol Mall, including twin 53-story hotel-condominium towers that would have been the tallest residential structures on the West Coast. They claimed to have lists of buyers lined up.

Some of those same developers are back with high-rise proposals now that the market has recovered, though none is close to being built. Among them, Beverly Hills investment firm Kennedy Wilson put forward a controversial proposal earlier this year to build two high-rise residential towers and a series of midrise towers on a leafy superblock it owns in downtown Sacramento.

Skeptics, however, say there’s a very limited market in Sacramento for luxury high-rise living compared to cities such as San Francisco, where many residents are well-off and buildable land is scarce. The costs of high-rise steel-and-concrete construction can run from $500 to more than $1,000 per square foot, requiring condos to be priced in the $1 million-plus range, experts said. That’s a tough sell in Sacramento, where wages and housing costs are much lower than in the Bay Area.

“High-rise residential development is still not feasible in terms of construction costs and the return you get back in rent or condo sales,” Miry said.

But the midrise projects just keep coming. Another one in the works is 1500 S Street, a proposal by Roseville-based Red Knoll Development to build four stories of wood-framed apartments on top of a one-story concrete podium. The ground floor would consist of 12,500 square feet of retail and restaurant space, according to local architecture firm LPAS, which is designing four of today’s multistory mixed-use projects, including the Whole Foods building at 2025 L Street, the i15 tower and 16 Powerhouse.

“Restaurant uses will spill out of the building into sidewalk cafes which will activate the street with a dynamic atmosphere,” the firm said in its project description of 1500 S Street. The plan is under review by city staff.

The Warren building, planned for 16th and N streets, will have 5,200 square feet of ground-floor retail and more than 100 apartments on top. The blighted 700 block of K Street is set to undergo a major redo by adding 137 apartments behind existing historic storefronts. And the recently completed Legado de Ravel building, a Spanish Colonial Revival style structure at 16th and O streets with a huge mosaic lizard crawling up its side, is leasing out its groundfloor commercial spaces and 84 market-rate apartments.

On R Street between 11th and 12th streets, the Warehouse Artist Lofts – called “Wal” – are under construction by CFY Development. The project consists of a completely renovated century-old brick warehouse and an adjoining new building that mirrors its boxy design and big square windows. The new building has three stories of wood construction on top of a two-story concrete base.

There will be 13,000 square feet of commercial space on the first floor, including restaurant seating on the former loading dock and a 9,000-square-foot market hall filled with the kiosks of artists and vendors, said developer Ali Youssefi.

Upstairs in the buildings, workers are piecing together 116 apartments that will be a mix of market-rate and low-income units, with preference given to literary and creative artists. There are already 700 artists on the waiting list, the developer said.

A three-bedroom apartment will start as low as $537 a month for those who make 30 percent of the area’s median income, Youssefi said. Market-rate studios with soaring ceilings and sleeping lofts will rent for around $1,000 a month, he said.

The $41.5 million project promises to be a key feature of the city’s R Street Corridor, a once-gritty warehouse district planned for redevelopment with shops, restaurants and loft apartments.

“This is not only mixed use, it’s mixed income,” Youssefi said. “Activating R Street is one of our key goals.”

Evan Compton, a senior city planner, said the combination residential-commercial projects being built show that developers see demand from buyers and tenants – including young professionals and downsizing empty nesters – who want to have urban amenities on their doorsteps.

Some central city streets, such as K Street downtown, are required to have retail and commercial on the ground floor.

“In midtown that’s not necessarily the case,” Compton said. “When developers propose that as part of a project, they see that as a benefit for residents to have amenities close by. People want to be in the core and walk to services.”

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