IRR-Sacramento Mid-Year Viewpoint 2015 Local Market Report - Industrial
The Sacramento industrial market continued to gain momentum during the first half of 2015, as sustained positive net absorption pushed the vacancy rate into single-digit territory; the recent completion of the first speculative building in nearly a decade was another positive sign for the market.
The recovery of the Sacramento industrial market, which began in 2011, has gained intensity over the past 30 months. After posting nearly two million square feet of positive net absorption during 2013, the market experienced net occupancy gains of more than three million square feet during 2014. Overall net absorption has remained positive thus far during 2015, despite negative activity in several submarkets; most notably, Radio Shack vacated their 323,000 square foot distribution center in Woodland during the first quarter.
Demand drivers include lager traditional distributors (retailers, e-commerce companies, food and beverage companies), as well as the return of smaller to mid-sized space users (10,000 to 50,000 SF). The rebounding construction sector is also playing a part, as properties catering to small users (5,000 SF and under) are also beginning to gain some leasing traction.
While construction activity during 2014 was dominated by user and build-to-suit facilities, 2015 marks the return of speculative construction to the region. The Buzz Oates Co. recently completed a speculative 118,000 SF warehouse (Raley Blvd.) and Ridge Capital has three speculative buildings (totaling 767,000 SF) under construction in West Sacramento. These trends suggest that the regional market is now moving from the recovery to the expansion phase.
The near term outlook is for continued positive absorption that will keep vacancy in the single digits, resulting in moderate rental growth as new speculative projects are delivered.
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IRR Mid-Year Viewpoint 2015 comprises a National Overview report and 300+ two-page Local Market Reports for all key property types as well as additional resources, including metrics methodology, graphs, and tables; these free reports may be downloaded from IRR’s site here.