MARKET DRIVERS
Marketwide vacancy has continued to trend upward, with the direct vacancy rate reaching 6.7% in Q1, now at a 10-year high. Rising vacancy reflects a combination of softening demand and recently delivered space coming online, though levels remain within a normalized range relative to longer-term historical cycles.
Similarly, availability across the region reached a decade-high rate in 1Q, an increase of 190-bps YOY ending at 10.3%. While elevated availability reflects increased leasing options across the market, it also points to a more competitive environment for landlords as tenants evaluate space needs more cautiously.
Asking lease rates have remained largely stable at $0.82/SF, holding near recent highs. However, rent growth has slowed considerably, reflecting broader economic conditions, though improvement is expected as the economy strengthens.
Leasing activity totaled 1.6M SF in Q1, declining from the previous quarter and slightly below prior-year levels. While overall demand has softened, interest from large users remains present, with several big-box requirements continuing to shape leasing activity. As these tenants take occupancy, absorption trends may improve in the coming quarters.
Sales activity remains active on a year-over-year basis, though transaction volume moderated from Q4 2025 levels. Investors continue to target well-located industrial assets, supported by Sacramento’s long-term logistics fundamentals, even as capital markets conditions remain selective.
ECONOMIC REVIEW
The unemployment rate in the Sacramento-Roseville-Folsom MSA was 5.2% in January 2026, up from a revised 4.8% in December 2025 and above the year-ago estimate of 5.0%. This compares to 5.5% for CA and 4.7% nationally during the same period.
Employment trends remain mixed, with gains in trade, transportation, and utilities helping to offset softness in other sectors. Industrial demand continues to be closely tied to distribution activity and regional population growth.
NEAR-TERM OUTLOOK
Conditions for Sacramento’s industrial market remain in transition following a period of elevated supply and softening demand. Vacancy and availability have increased, but leasing activity—particularly among larger users—should help support absorption as new spaces are occupied. Rent growth is expected to remain moderate in the near term, with landlords continuing to offer concessions to maintain occupancy. However, limited new construction starts and Sacramento’s strategic position within Northern California’s logistics network should help support longer-term fundamentals.
While capital markets remain cautious, investor interest in industrial assets persists given the sector’s strong underlying demand drivers. Sacramento has mostly been viewed as a relatively stable industrial market compared to other California regions, which may help support increased investor interest in the near term as conditions move toward a more balanced environment.
1Q 2026 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 Reaches 10-Year High: Sacramento’s direct industrial vacancy rate increased to 6.7%, up 100 basis points year-over-year, reflecting recently delivered space and softer demand.
- Availability Continues to Climb: Total availability rose to 10.3%, marking a 190-bps year-over-year increase and creating a more competitive leasing environment for landlords.
- Asking Rents Hold Near Peak Levels: Average asking rents ticked up slightly to $0.82 PSF (NNN), a 1.2% year-over-year increase, though rent growth has slowed considerably.
- Net Absorption Remains Negative: Direct net absorption totaled -406,123 SF in 1Q 2026 as new supply outpaced near-term tenant demand.
- Leasing Activity Stabilizes: Leasing volume reached 1.61M SF, holding relatively flat year-over-year and supported by continued interest from large industrial users.
- Sales Volume Jumps Year-Over-Year: Industrial sales activity climbed to 714,299 SF, representing a 62% year-over-year increase, driven by investor demand for well-located assets.
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