FUNDAMENTALS HEALTHY ENOUGH FOR BUILD-TO-SUIT, EYES ON SPEC DEVELOPMENT

Sacramento’s ongoing revitalization has given hope to those aiming to win Amazon’s HQ2 proposal, a potential 8-million-square-foot campus development that would transform the region’s economic landscape. Meanwhile, office market fundamentals are as healthy as we’ve seen in a decade, and rents are starting to grow more rapidly. Private sector employment is up, with the most significant gains in the healthcare industry. Healthcare administration contributed the biggest portions of absorption this quarter, from both the State of California and national companies. New development is also mostly healthcare related, with a build-to-suit headquarters for Adventist Health and new outpatient clinics for Kaiser Permanente and Dignity Health in the works. While the cost of construction has kept large-scale spec development out of reach in most submarkets, we expect to see some additional suburban build-to-suit projects commence and increased focus on the outcome of Midtown’s lofty Ice Blocks project.