SACRAMENTO OFFICE MARKET SITUATED FOR CONTINUED SUCCESS

Rents continue to rise due to lack of space as vacancy reached its lowest point in 16 years. The first speculative office development on “The Grid” in nearly a decade delivered at the Ice Blocks. Average asking rents for Downtown Class A space have now surpassed $3.00 per square foot. First speculative development outside of Downtown to be built could be Bannon Investors’ 90,543 square foot project in South Natomas. Still, build-to-suits and renovations continue to dominate new supply as evidenced by Kaiser Permanente’s new Downtown Commons Medical Offices and developers’ reluctance to pull the trigger on speculative projects. Two Downtown State of California office towers, 1.1 million square feet combined, are now underway and slated for completion in 2021. Sacramento’s office market fundamentals are attracting a substantial influx of capital as investment volume is on track to surpass $1 billion for the third year in a row and average sale prices are approaching $200 per square foot for the first time since 2008.