Sacramento region continues to show signs of strong growth
Growth in the Sacramento region persisted during the second quarter 2017, as employment gains directly contributed to a quarter of modest leasing activity, according to Cushman & Wakefield.
Sacramento added approximately 13,000 new jobs, representing an increase of 1.4 percent in total nonfarm jobs, pushing regional unemployment down by 60 basis points from a year ago. The healthcare/education sector saw the highest level of overall regional job creation, with 5,700 new positions added, representing a 3.9 percent in year-over-year expansion for this sector.
Overall vacancy in the Sacramento region has decreased by 40 basis points since the previous quarter, and is down 130 basis points since the second quarter 2016 at 10 percent. Nearly all submarkets experienced declining office vacancy rates in second quarter 2017, with more than half in single-digit territory.
Overall asking rents in the region rose a modest $0.04 per square foot since last year to $1.80 per-square-foot-per-month (PSF) on a full service gross (FSG) basis. CBD class A average asking rents remained relatively flat, ending second quarter 2017 at $2.86 PSF (FSG). Looking to the top 17 class A highrise buildings in the CBD, there was a greater upward pressure on rental rates. On average, these buildings have appreciated by approximately 10 percent since the second quarter 2016 to a combined average asking rate of $2.92 PSF. Neighboring Midtown has seen the most dramatic swing in rents over the past year, increasing by 9.9 percent from $2.03 PSF to $2.23 PSF.
There are several projects underway, and an additional entitled projects[??] are in the pipeline for 2018 and later.
The largest project currently under construction is the build-to-suit Adventist Health building located at the corner of Stone Point Dr. and Rocky Ridge Dr. in Roseville, totaling 242,000 square feet and scheduled to deliver during the third quarter 2018. The largest speculative project currently under construction is The Ice Shop in Midtown. This 138,900-square-foot mixed-use property will deliver approximately 40 percent or roughly 99,000 square feet of office space in the second quarter 2018.
