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June 15, 2024
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E-Commerce and Logistics Companies Fuel a Recovery in the Sacramento Industrial Market


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 2019s 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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