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12/29/21
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Sacramento Industrial CRE Market Update – 4th Qtr 2021
This report was provided by real estate services firm Kidder Mathews
Market Drivers
• Direct vacancy rates decreased 43.3% year-over-year (YOY) from 6.0% in 2020 to 3.4% in 2021. The total availability rate had a similar drop of 22.2% YOY over the same timeframe to 5.4%.
• Asking lease rates for all industrial property types gained 17.0% YOY to $0.69/SF NNN for 2021. Asking lease rates for warehouses and flex properties were at $0.65/SF NNN and $0.94/SF NNN respectively.
• Direct net absorption was at 1.5 msf for 4Q 2021. Direct net absorption for all of 2021 stood at 8 msf.
• Leasing activity dropped 52.9% YOY from 2.7 msf in 4Q 2020 to 1.2 msf in 4Q 2021. Compared to 2020, leasing activity for 2021 dropped 9.6% YOY to 9.5 msf, nearly double 2019’s leasing activity of 5.5 msf.
• Sales volume leapt 53.0% YOY from 4.6 msf in 2020 to 7 msf in 2021.
Economic Overview
• Manufacturing jobs for the Sacramento – Roseville – Arden-Arcade MSA gained 7.7% YOY to 37,700 jobs. Transportation and warehousing jobs also rose 1.6% YOY to 39,100 jobs.
• Unemployment in California stood at 5.4% for November 2021. During this period, the Sacramento – Roseville – Arden Arcade MSA reported a 4.7% unemployment rate.
Near-Term Outlook
• The Sacramento industrial market has largely recovered from COVID-induced slowdowns during 2021. Compared to 2019, sales and leasing activity has roughly doubled. The direct vacancy rate fell 25% from 4.6% in 2019 to 3.4% in 2021. E-commerce and wholesale distribution companies help drive direct net absorption to 8 msf. These factors signal a tightening supply and help drive asking lease rates and sale prices upwards. There are currently 4.1 msf of industrial properties under construction to help satisfy industrial needs.
Source: CoStar; State of California Employment Development Department
Market Highlights
• Asking lease rates for all industrial properties were $0.69/SF NNN.
• Direct vacancy rates stood at 3.4%.
• Direct net absorption for 2021 was 8 msf.
This report was prepared by Kidder Mathews Director of Research Gary Baragona
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