Sacramento holds the seat of government for California, and the state government plays an important role in the local office market. A growing healthcare sector, two public universities investing in biotech are also key players. Furthermore, the market is home to many smaller firms and has not benefited from growth in the tech industry, as those companies prefer to remain closer to the coast and were willing to pay a significant premium in the Bay Area, just 90 miles away.
Market vacancy is at 11.4 percent, up from the 5-year average of 9.7 percent but below the national average of 13.3 percent. Office demand remains negative at -950,000 square feet with rent growth down at -1.3 percent for 4- and 5-star properties. Leasing activity is low, and Class A, B, and C lease rates range from $1.79 to $2.82 per square foot. The office sales market has slowed significantly, with recent sales at deep discounts compared to previous years, reflecting a preference for multi-family or industrial properties due to the ongoing work-from-home trend.
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