MARKET DRIVERS
Marketwide vacancy has steadily increased in recent years, driven in large part by sublease inventory, which has doubled in the past year to approx. 2M SF. The direct vacancy rate increased to 6.2% in 4Q, up 20 basis points (bps) year-over-year (YOY). The South Sacramento Submarket had the highest direct vacancy rate at 23.9%, while the East Sacramento submarket posted the lowest direct vacancy rate of 0.3%.
Availability across the region mirrored vacancy trends, reaching a decade-high rate in 4Q,an increase of 190 bps YOY ending at 10.0%. The Natomas/Northgate and Elk Grove/Laguna submarkets continued to lead the market with the highest availability at 13.9%, while East Sacramento posted the lowest rate at 2.8%.
After four consecutive quarters at a steady rate, the average asking lease rate increased slightly YOY to $0.82 PSF. While still near the 2023 peak of $0.83 PSF NNN, growth has slowed noticeably, marking one of the slowest periods of rent gains in the past decade. Total leasing activity in 4Q fell to 1.09M SF, down 31% QOQ and marking a five-year annual low. Overall demand has softened over the past year, but interest from large users remains strong, with multiple deals and expansions exceeding 100K SF. This activity should provide positive momentum for absorption in the coming quarters as these firms take occupancy of their new big-box spaces.
Sales activity rebounded in Q4, doubling year-over-year to roughly 2.5M SF. As construction slows and supply constraints ease, Sacramento’s logistics market is poised to absorb new space and support rent growth, making the region an attractive target for investors.
ECONOMIC REVIEW
The unemployment rate in the Sacramento MSA was 5.0% in November, up 20 bps from the year-ago estimate of 4.8%. This compares to California’s unemployment rate of 5.4% and 4.3% for the nation during the same period. Although the Construction sector recorded a loss of an estimated 3,600 jobs from October to November, the Trade, Transportation, and Utilities sector reported gains of 4,400 jobs over the same period.
NEAR-TERM OUTLOOK
Rent growth has moderated below historical averages; however, leasing momentum in newer developments and improving confidence among larger corporate users are expected to provide support through 2026. The current slowdown is widely viewed as cyclical, reflecting broader economic conditions, with leasing activity expected to improve as economic expansion resumes. As larger requirements re-enter the market, demand for big-block space could strengthen, helping stabilize vacancy and gradually lift rent growth toward longterm norms.
Sacramento’s industrial market continues to move through a transitional phase, consistent with conditions seen across many major industrial markets. Sales volume has moderated, and elevated interest rates have widened the gap between buyer and seller pricing expectations, limiting deal flow. Despite these near-term challenges, market softness appears largely cyclical in nature. Sacramento’s strategic logistics advantages, access to Northern California population centers, and expanding distribution and manufacturing presence remain key longterm supports. As financing conditions improve and vacancy trends stabilize, investor sentiment is expected to strengthen, setting the stage for a more balanced recovery in transaction activity over the next 12 to 18 months.
4Q 2025 Sacramento Industrial Market: Key Data Points
Explore our full Sacramento industrial market review for deeper insights into leasing trends, sale activity, and submarket performance.
- Vacancy Rate Edges Higher: Direct vacancy rose to 6.2%, up 50 basis points year-over-year.
- Asking Lease Rates Hold Steady: Average asking rent reached $0.82 PSF NNN, a 1.2% increase YOY.
- Leasing Activity Declines: Quarterly leasing totaled 1.09M SF, contributing to a 22.9% annual drop
- Net Absorption Negative: Q4 posted -66K SF, reflecting ongoing demand softness.
- Sales Volume Doubles: Industrial sales surged to 2.54M SF in Q4, pushing annual volume up 6.1% YOY.
- Availability Hits Decade High: Total availability climbed to 10.0%, up 190 basis points YOY.
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