MARKET DRIVERS
DIRECT asking lease rates grew 2.4% year-over-year (YOY) from $2.07/SF full service (FS) in 2020 to $2.12/SF FS in 2021.
OVERALL, direct net absorption for 2021 was 65,647 SF. This was fueled by 528,638 SF positive net absorption for 4Q 2021.
LEASING activity increased 22.8% YOY from 2.8 million SF in 2020 to 3.5 million SF in 2021. Downtown and the Roseville/Rocklin area were the most active submarkets for the year with 797,129 SF and 626,850 SF respectively. Downtown was by far the most active submarket of 4Q 2021 with 569,299 SF.
SALES volume dropped 22.1% YOY from 4.1 million SF in 2020 to 3.2 million SF in 2021.
THE TOTAL vacancy rate increased 11.4% YOY from 9.3% in 2020 to 10.4% in 2021.
ECONOMIC OVERVIEW
THE CIVILIAN labor force for the Sacramento – Roseville – Arden Arcade MSA grew 1.7% YOY to 1.1 million workers. The professional and business services sector grew 2.7% YOY to 137,100 SF.
UNEMPLOYMENT in California stood at 5.4% for November 2021. During this period, the Sacramento – Roseville – Arden Arcade MSA reported a 4.7% unemployment rate.
NEAR-TERM OUTLOOK
THE OFFICE market is showing signs of recovery from COVID induced slowdowns. Net absorption and leasing activity have increased each quarter this year. Although vacancy rates have crept upwards, asking lease rates are holding steady.
HOWEVER, the uncertainties of when the market may fully recover from COVID make companies hesitant on making any long-term commitments on new leases. With 1.5 million SF of state-owned buildings currently under construction and hybrid work measures reducing demand, the possibility of shrinking State of California requirements weigh on the Sacramento market.
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