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Market Report

Sacramento Office Investment Forecast

2020 Office

Vacancy Reaches Cycle-Low Rate; Extended Rent Growth Momentum Encourages Investment

 
Solid demand persists amid dearth of construction. Spanning the past four years, Sacramento’s employment base expanded by approximately 90,000 jobs, 20 percent of which were traditional office positions. Expansions and relocations by private and corporate users during this stretch translated to strong office leasing velocity. The resulting absorption of 4.5 million square feet of space coincided with steady rent growth, elevating the metro’s average asking rate nearly 12 percent. With vacancy at a cycle-low level entering this year and historically above-average rent gains occurring, speculative construction seems warranted, yet a lack of this development persists. Instead, the completion of Centene’s 68-acre campus in Natomas comprises nearly all the space set to be finalized in 2020. A consistent pace of office-using job creation is slated for this year, suggesting companies will need additional or larger floor plans to support larger staffs. With the stock of available space unchanged by construction activity, existing floor plans in core Sacramento and office-heavy suburbs remain in high demand, slashing metro vacancy below 11 percent.

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