The Future’s Looking Bright For Sacramento Commercial Real Estate

Tara Taylor  /   January 17, 2018

I had the pleasure of attending IREM (Institute of Real Estate Management) and RHA’s (Rental Housing Association) joint 2018 forecast last week. Having attended many of these types of events, I knew what to expect. I also knew where the market stands and, for the most part, where it is going, but what I didn’t expect was the difference of the energy in the room. The excitement was palpable; the positivity contagious. It is a great time to be involved in the Sacramento commercial real estate market.

So, what did they have to say?

Marie Davis of the Greater Sacramento Economic Council commenced the presentation by pointing out some very strong points about the Sacramento region, including our strength in workforce talent, citing the fact that the share of the region’s workforce with a bachelor’s degree has outpaced growth in both California and the U.S. She also referenced the increasing migration of residents from the bay area to the Sacramento area. She stated it was a “pivotal moment” in Sacramento; one that we should capture.

Jason Goff, Executive Vice-President at CBRE, expressed confidence in the office market in his 2018 forecast. He cited the “arena effect” and the resulting re-development of downtown and mid-town. Rental rates for class A office space in downtown have returned to their all-time high of $3-$3.50/ square foot and Roseville office rents have excelled past their peak. Vacancy in the region is down to 12.9% and he expects vacancy to continue to decline in 2018.
Bryan Wirt, retail advisor at Kidder Matthews had the least optimistic report, but stated strong holiday sales created optimism for 2018. He cited declining vacancy for outlying areas like Roseville, Rocklin and Elk Grove, but increasing vacancy for interior portions of the region, like Citrus Heights. He believes vacancy overall in the region will remain flat in 2018, with transition of existing retail space to experiential uses like Ifly, Top Golf and Lazy Dog.

John Schaffer, Multi-family specialist at Colliers International, was pleased with the solid apartment market over the past five years, noting that occupancy has exceeded 95% for 19 straight quarters and the Sacramento region lead the nation in rent growth for the past two years. He expects vacancy to remain at this low and rents to remain at their peak through 2018, until more new construction becomes available.

Matt Cologna, Senior Director at Cushman Wakefield, ended the presentation on an even higher note, citing industrial vacancy rates at a 20-year low of just 5.8% in the region, with a net absorption of five million square feet in the past year. He expects vacancy to continue to decline and rents to continue to increase in 2018, as a result of the growth of the cannabis and ecommerce industries.

2018 is forecasted to be another great year for commercial real estate in the greater-Sacramento area. How will you take advantage of it? If you own investment property, take a good look at your strategy and seize the moment. To ensure that you are receiving the maximum return on your investment, call Laverty Chacón today, at (916) 722-0333, or email me at ttaylor@lavertychacon.com.

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