By Jon Peterson
Over the last year or so, the story of Sacramento’s commercial real estate market has been intricately linked to the greater Bay Area, and it has been a positive one. This may be one of the reasons San Jose-based Insight Realty Company has placed on the market for sale the 157,372 square foot Harvard Square office building in Sacramento located at 2180 Harvard Street. The asset is priced at $26.8 million, according to the property’s offering document.
The seller has selected the CBRE office in Sacramento as the listing agent on the sale. One of the people working on the transaction is Randy Getz, an executive vice president with CBRE.
Should the anticipated pricing be reached on the sale, the office property would be acquired by the new owner at a price of $170 per square foot. The going-in cap rate on the transaction is expected to be around 7.7 percent.
Harvard Square is a suburban office complex located approximately four miles northeast of the central business district of Sacramento. The current occupancy of the property is 88 percent, occupied by 18 tenants that take up on average 7,500 square feet.
Most of the tenants in the building, or roughly 93 percent of the occupied space, is leased to credit tenants. All of the tenants continued to pay full rent through the outbreak of the pandemic. Insurance and finance companies lease a total of 41,985 square feet in the property. These tenants include American Contractors Indemnity, Liberty Mutual Insurance and Alliant Insurance.
The next sector that has the most space is government tenants that total 37,329 square feet. Included in this space are Department of Industrial Relations, Cal Fire and Farm Credit Administration. One other large tenant is Molina Healthcare which has a lease for 24,333 square feet.
Harvard Square is one of a limited number of suburban office assets in Sacramento that has a multi-level parking structure. Employees of tenants in the property do have the option of paying $35 per month for an assigned parking spot.
The office property is located within the Point West sub-market of Sacramento. This area is considered to be a lower priced alternative to downtown where rents are typically 35 percent higher and also have high monthly parking fees, which can exceed $200 per month.
The Point West market has a total of 3 million square feet of office assets. The higher end of that market, comprised of A or B quality properties, totals around 2.1 million square feet spread across 43 assets. The sub-market has had no spec office construction started since 2006 and none is likely in the near- to mid-term due to the high costs of new construction.