Downtown Sacramento Office Building, Nearly Fully Leased, Sold for First Time

A Downtown Sacramento office building that is nearly fully leased has sold for the first time.

Escrow closed March 1 for 901 H St., a six-story, 51,340-square-foot building built in 1964 that has been under the same ownership until now.

“It’s not only a stable, cash-flowing asset, but there’s the possibility of conversion into office condos or a residential use,” said Jack Scurfield, a director with Turton Commercial Real Estate who helped broker the deal. “The buyer toured the building and quickly saw the vision.”

Scurfield said the building sold for $5.375 million, or about $1.35 a square foot for the portion of the building that can be leased. Records show the buying entity, Ninth & Jefferson LLC, has the same address in Los Altos as The Hernon Group, a real estate investment company.

A message left through Hernon’s website Monday wasn’t returned.

At the time of sale, the building was 98% leased, Scurfield said. That’s a rarity in the current market, as many office tenants are downsizing to adjust for hybrid and remote workforces.

The high occupancy at 901 H St. can be partly attributed to on-site management and ownership during its history that took good care of the tenant base, Scurfield said. Proximity to the Sacramento County Courthouse is another factor, with many tenants connected to legal services. And when the previous ownership lost a couple large tenants during the Covid-19 pandemic, he said, they retrenched by creating executive suites for a single operator with shared common spaces and conference rooms, getting positive leasing results.

Records show Bowman & Bay Building Joint Venture as the sellers in the deal. Representatives of that group couldn’t be reached for comment Monday.

The building should continue to be in demand even after a new Sacramento County courthouse opens a few blocks away in the next year, Scurfield said. Rents at 901 H St. are about 35% to 40% below market rates, he added.

For the long run, the owner might explore conversion opportunities, which were highlighted in Turton Commercial’s marketing of the property, he said.

“It’s an opportunity to see some kind of drive home on the vision we pitched,” he said, noting the building’s midcentury modern features, such as numerous balconies and verandas, make it more suited for conversion than many office properties.

In addition to Scurfield, Ken Turton of Turton Commercial brokered on the sale.