$2 million renovation planned for downtown Santa Rosa office building

The owners of a four-story office building that’s home to Westamerica Bank’s downtown Santa Rosa branch are investing $2 million into upgrades to help spur demand to fill the vacant spaces.

It comes at a time of returning interest in recent months from prospective tenants to be in the city’s center area.

Over the next six months, the lobby, entryway and other common areas in the nearly 63,000-square-foot building at 111 Santa Rosa Ave. are set to be revamped, according to Jeff Koblick, one of the owners.

“Our feeling is there is always demand for the highest-quality, nicest office space,” Koblick said. “That’s what we’re trying to be.”

Commercial real estate experts often describe this recurrent trend as “flight to quality.” When office real estate markets are under some form of stress in demand from organizations wanting to sign deals, the leases that are inked are at newer, better-located properties with modern amenities.

A similar trend has been underway in the new flexible work environment since the pandemic, according to Brookfield, which has 500 million square feet of income real estate assets under management.

At 111 Santa Rosa, occupancy was 85% through 2019. Today, the current 14 tenants — others include Meinberg USA, Sonoma County Office of Equity and Sonoma County Local Agency Formation Commission — occupy about half the building.

One of the challenges at 111 Santa Rosa and other office buildings has been the global change in how organizations use such communal spaces. A few tenants in the building have opted to have employees work entirely from home.

But some are doubling down on both the office environment and the downtown.

The U.S. arm of Meinberg, a German maker of time-synchronization systems for global industrial companies, relocated to 111 Santa Rosa last fall from a business park in west Santa Rosa. Sonoma County’s diversity team also recently relocated from the 50 Santa Rosa Ave. building one block north.

In the past month, two organizations have been scouting the building for up to 10,000 square feet apiece, a size range that has been a rarity for private-sector tenants in the Santa Rosa office market in the past few years.

“There’s definitely been an uptick in the number of tours we’ve had in the market, from February for sure,” said Paul Schwartz, a Corcoran Icon Properties Commercial agent who is listing the building for lease.

Schwartz takes issue with a common perception that downtown isn’t safe or vibrant, pointing to ramped up efforts from City Hall and the police department to increase patrols. He notes the opening of a few new restaurants in recent months and downtown housing projects under construction.

More available office space downtown has been bringing out prospective tenants, according to Schwartz, who pointed to recent estimates of about 20% vacancy downtown, including older spaces.

But the incentives downtown property owners are having to offer, such as months of free rent, are becoming less common than they were two to four years ago, a sign of market stabilization, Schwartz said.

To attract more tenants, a key element to the 111 Santa Rosa Ave. renovation project is to modernize the interior. Around the interior skylit atrium, white-painted tube steel railings will be replaced to move away from what Koblick called a “cruise ship look.” A nonstructural column on one side of the atrium also will be removed to achieve the same goal.

An Interior hallway on the third floor had previously been replaced with additional office space, exchanging interior walls on that floor with glass walls at the edge of the atrium. That is set to be done also on the second floor.

The current building ownership, Magna Real Estate LLC, is made up of 22 investors and has 10 property holdings total, including the Sportsman’s Warehouse store in Rohnert Park and Fairfax Plaza, a southern Marin County shopping center anchored by a Good Earth natural foods store. This ownership acquired the building in February 2018.

TLCD Architecture designed the improvements. Meylan Construction is the project general contractor.

Jeff Quackenbush covers wine, construction and real estate. Reach him at jquackenbush@busjrnl.com or 707-521-4256.