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Sacramento Industrial Market Report

2nd Quarter 2022

Posted In — Market Research | Market Report

MARKET DRIVERS

DIRECT VACANCY rates decreased 25.9% Year-Over-Year (YOY) from 4.8% in 2Q21 to 3.6% in 2Q22. The total availability rate had a less significant drop at 6.4% YOY from 6.1% in 2Q21 to 5.7% in 2Q22.

ASKING LEASE rates increased 13.6% YOY from $0.64 in 2Q21 to $0.73 in 2Q22.

TOTAL LEASE transactions reduced 69.2% YOY from 3.5 million SF in 2Q21 to 1.1 million SF in 2Q22 due to the high demand and limited availability of industrial space.

SALE TRANSACTIONS were also affected by the increased demand of industrial space with the lack of available SF. The number of sales transactions decreased by 24.9% YOY from 1.9 million SF in 2Q21 to 1.4 million SF in 2Q22.

DIRECT NET ABSORPTION confirmed the reduced availability in industrial space with a decrease from 3.9 million SF in 2Q21 to negative 55,414 SF in 2Q22.

ECONOMIC REVIEW

THE UNEMPLOYMENT RATE in the Sacramento-Roseville-Arden-Arcade area fell below pre-pandemic levels, dropping 1.4% from 4.6% in 1Q22 to 3.2% in 2Q22.

THE NUMBER of employment positions in Trade, Transportation, and Utilities in the Sacramento region increased by 38.2% (550 jobs) from the previous quarter, reflecting strong demand from the industrial sector.

DESPITE the solid demand for industrial space, employment in Construction and Manufacturing decreased 4.5% (77.7k jobs) and 2.9% (38k jobs), respectively, in 2Q22.

DUE to supply chain issues, consumers want products stored locally in industrial buildings to combat wait times for goods. Along with this, more companies are looking to manufacture goods locally due to rising business costs overseas.

NEAR-TERM OUTLOOK

THE SACRAMENTO REGION is one of the fastest growing regions in California due to the population’s level of education and annual growth in tech jobs. This suggests increased necessity for industrial real estate.

WITH THE DEMAND for industrial space and the excess of office space, individuals are converting office properties to suit the needs of the buyers. However, supply chain demands and restraint in capital markets has slowed development.

COMPANIES are looking for industrial buildings that have higher power, taller ceilings, level flooring to allow for industrial robotics amid the labor shortage.

INDUSTRY PROFESSIONALS are optimistic about the market as it does not appear to be slowing.

 
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