Sacramento Market Reports

Sacramento Office Market Report

At the end of the third quarter of 2022, the country continues to deal with inflation, as well as talk of a potential recession in the coming months. Economic challenges, such as rising prices and interest rates, have bypassed the concern of the pandemic. During the third quarter of 2022, more companies have required employees to report back to the office, but an increasing number of companies have implemented a hybrid or remote work policy, resulting in a continuation of 2020 and 2021’s trends of space coming back on the market. The office vacancy rate rose slightly to 14.0% in the third quarter of 2022. In the third quarter of 2021, the office market recorded a vacancy rate of 11.8%; the current vacancy rate of 14.0% is the highest vacancy rate since the fourth quarter of 2016. A mix of direct space and sublease space came on the market this quarter; unfortunately, more space is expected to hit the market in the next two quarters, and the vacancy rate could increase by nearly 200 basis points.

Sacramento Industrial Market Report

While reports of continued high inflation and aggressive rate hikes from the Federal Reserve have many worried about the future of the national and local economy, the Sacramento industrial market seems poised to weather any upcoming storm. Even though rising interest rates will undoubtedly put upward pressure on cap rates and some tenants will be particularly affected by the profit margin squeeze brought about by high inflation levels, the overall market leasing fundamentals remain strong. Evidence of this can be found in the continued record levels of interest from institutional investors looking to either enter or grow their holdings within the market. Furthermore, developers, both locally and nationally, also remain bullish on the local industrial market, with over 4.5 million square feet of industrial product currently under construction in the Sacramento region, an all-time high.