MARKET DRIVERS
DIRECT VACANCY rates decreased 6.81% year-over-year (YOY) from 5.10% in 2Q20 to 4.75% in 2Q21.
ASKING LEASE rates for all industrial property types were $0.64 NNN for 2Q21. This represents a slight 3.23% decrease from the previous year. Asking lease rates for warehouses were at $0.61 NNN. Flex properties asking lease rates stood at $0.91 NNN.
DIRECT NET absorption for 2Q21 was a stellar 3.93 million SF, almost equaling the direct net absorption accumulated over the past three years.
2021 CONTINUED to be a very active year. Leasing activity grew 40.8% from 1.83 million SF in 1Q21 to 2.57 million SF in 2Q21.
SALES VOLUME rose 20.3% from 1.24 million SF in 1Q21 to 1.49 million SF in 2Q21.
2.22 MILLION SF of new supply hit the industrial market in 2Q21. 3.35 million SF of industrial buildings were newly constructed during the first half of 2021.
ECONOMIC REVIEW
MANUFACTURING JOBS for the Sacramento – Roseville – Arden-Arcade Metropolitan Statistical Area (MSA) crept upwards by 3.6% YOY to 35,900. Transportation and warehousing jobs gained 9.9% YOY to 35,600.
CALIFORNIA unemployment stood at 7.5% for May 2021, with the Sacramento – Roseville – Arden-Arcade MSA reporting a 6.3% unemployment rate.
CALIFORNIA removed most COVID-19 restrictions on June 15. As the economy improves, expect demand for industrial properties to increase.
NEAR-TERM OUTLOOK
LOGISTICS and e-commerce companies continue to fuel needs for warehouse properties. Even with 3.35 million SF constructed in the first half of 2021 and another 3.5 million SF under construction, demand continues to outstrip supply. These fundamentals continue to push up asking rents.