MARKET DRIVERS
DIRECT vacancy rates increased 13.2% YOY from 5.1% in 1Q20 to 5.8% in 1Q21.
ASKING lease rates for all industrial property types were $0.63 NNN for 1Q21. This represents a slight 1.6% decrease from the previous year. Asking lease rates for warehouses were at $0.60 NNN. Flex properties asking lease rates stood at $0.88 NNN.
DIRECT net absorption for 1Q21 was at 1.24M SF, as logistics and auto companies helped provide strong occupancy gains to start the year.
LEASING activity grew 3.9% YOY from 1.63M SF in 1Q20 to 1.69M SF in 1Q21.
SALES volume dropped 6.0% YOY from 1.23M SF in 1Q20 to 1.16M SF in 1Q21.
1.13M SF of new supply hit the industrial market for 1Q21, building upon the 3.34M SF delivered in 2020.
ECONOMIC REVIEW
THE Sacramento metropolitan area recently shifted from the most restrictive purple tier to the red tier. Companies are planning to gradually increase their in-person work as more people become vaccinated against COVID-19 and counties move towards less restrictive tiers. California unemployment stood at 8.4% for February 2021, with the Sacramento – Roseville – Arden-Arcade Metropolitan Statistical Area reporting a 7.2% unemployment rate.
NEAR-TERM OUTLOOK
LOGISTICS and e-commerce companies continue to fuel demand for warehouse properties. 1.13M SF of new supply has been delivered, with 3.5M SF in the construction pipeline. Vacancy remains low, placing upward pressure on asking lease rates.