Sacramento Office Market Report

The following reflects Sacramento office market conditions as of Q2 2026.

MARKET DRIVERS

Sacramento’s office market showed modest improvement during the second quarter, with direct vacancy declining to 11.1%, marking a potential shift from the steady and continual increases experienced in recent years and a possible early sign of stabilization.

Overall availability decreased to 13.6% and remained below year-ago levels, indicating a continued tightening in market conditions driven by reduced sublease inventory and limited additions of large available blocks.

Leasing activity remained positive but relatively subdued through the first half of 2026, with demand primarily driven by smaller tenants. Recent government leasing transactions also suggest a renewed source of demand from the public sector.

Market conditions continue to favor tenants, as asking rents softened year-over-year, while landlords remain flexible with concessions and lease structures to secure occupancy. Despite this, well-located, high-quality assets, particularly in Downtown Sacramento, continue to achieve rent premiums and attract stronger demand.

Both investment activity and new development activity remain limited as buyers and developers continue to be cautious and selective. However, the constrained supply pipeline may help support longer-term market stabilization and strengthen fundamentals as leasing demand gradually improves.

ECONOMIC OVERVIEW

The unemployment rate in the Sacramento-Roseville-Folsom MSA was 4.2% in May 2026, down from 4.7% in March 2026 and above the year-ago estimate of 4.4%. This compares to 5.3% for the state of California and 4.2% nationally during the same period.

Sacramento continues to benefit from its relative affordability compared to coastal California markets, supporting steady population trends and business migration. While the region still trails major tech hubs in scale, hybrid work dynamics continue to support its role as a cost-effective alternative for satellite offices and back-office operations.

NEAR-TERM OUTLOOK

Sacramento’s office market is showing early signs of stabilization, with vacancy rates leveling off and available space gradually declining. While tenant demand remains subdued compared to historical averages, solid leasing activity during the first half of the year indicates improving conditions and a modest increase in market momentum. Conditions are expected to remain favorable for tenants in the near term, as landlords continue to rely on concessions and flexible lease structures to drive transactions.

However, limited new construction and a shrinking inventory of available space may help support a more balanced market over time. Looking ahead, recovery is expected to be gradual, with performance continuing to differ by asset quality and location. Well-located properties with modern amenities are likely to attract the strongest demand, while older or less competitive buildings may continue to face leasing challenges and longer absorption timelines.

Frequently Asked Questions

What is the office vacancy rate in Sacramento in Q2 2026?

Sacramento’s direct office vacancy rate was 11.1% in Q2 2026, according to Kidder Mathews research. That is down slightly from 11.2% in the first quarter and only 10 basis points above the 11.0% rate recorded a year earlier, suggesting the market’s steady climb in vacancy over recent years may be leveling off. Total vacancy across all classes stood at 11.4% market-wide.

What is the total office availability rate in Sacramento right now?

Sacramento’s total office availability rate was 13.6% in Q2 2026, down 20 basis points year-over-year from 13.8% (Data source: CoStar). The decline reflects reduced sublease inventory and fewer large blocks of available space coming to market, a sign of continued tightening even as headline vacancy remains elevated.

How much office leasing activity took place in Sacramento in Q2 2026?

Office tenants leased 444,305 SF in Sacramento during Q2 2026, bringing year-to-date leasing activity to 1,167,182 SF, according to Kidder Mathews research. That year-to-date figure is down 11.1% compared with 1,311,671 SF over the same period in 2025, with demand driven primarily by smaller tenants alongside renewed government leasing activity. The largest submarkets for activity were the Highway 50 Corridor and Roseville/Rocklin.

What was net absorption for Sacramento office space in Q2 2026?

Sacramento’s office market posted positive net absorption of 48,520 SF in Q2 2026, bringing year-to-date net absorption to 75,352 SF. Net absorption measures the net change in occupied space, so a positive figure means tenants took occupancy of more space than they vacated during the period. That year-to-date total is down 80.3% from 380,927 SF in the same period of 2025, reflecting more measured leasing demand this year despite the market remaining in positive territory.

What are average office asking rents in Sacramento in Q2 2026?

The average direct asking lease rate for Sacramento office space was $2.14 per SF per month, full service, in Q2 2026, down 3.2% year-over-year from $2.21 (Data source: CoStar). Rates across submarkets ranged from as low as $1.36 per SF in Rio Linda/N Highlands up to $2.93 per SF in Elk Grove, with Downtown Sacramento continuing to command rent premiums for well-located, high-quality assets.

Is there new office construction underway in Sacramento?

Office construction activity in Sacramento remains limited, with no new deliveries completed in Q2 2026, according to Kidder Mathews research. Two projects were underway as of the quarter’s end: a 92,000 SF build-to-suit for Dignity Health in Folsom slated for delivery in the first quarter of 2027, and a 38,350 SF building at Riverpoint North Corporate Center in West Sacramento expected in the third quarter of 2027.

What was the largest office sale in Sacramento in Q2 2026?

The largest office sale in Sacramento in Q2 2026 was Broadstone Business Center in Folsom, a 64,080 SF property that sold for $25,316,000, or $395.07 per SF, with Seavest Healthcare Properties, LLC acquiring the asset from 80 Iron Point Partners, LLC (Data source: CoStar). Overall office sale volume reached 928,290 SF year-to-date, up 29.3% from 718,241 SF over the same period in 2025.

What was the largest office lease signed in Sacramento in Q2 2026?

The largest office lease signed in Sacramento in Q2 2026 was a 10,000 SF transaction at 400 Capitol Mall in Downtown Sacramento, signed in April 2026 between landlord Buzz Oats and tenant Libra Cassie, according to Kidder Mathews research. Other notable leases included an 8,800 SF deal in North Natomas and an 8,500 SF lease with the CA District Attorney Association in South Natomas.

What is the outlook for the Sacramento office market?

Sacramento’s office market is expected to see a gradual, uneven recovery, with performance continuing to vary by asset quality and location, according to Kidder Mathews research. Well-located properties with modern amenities are likely to attract the strongest demand, while older or less competitive buildings may continue to face leasing challenges. Limited new construction and a shrinking pool of available space are expected to support a more balanced market over time, with landlords likely to continue relying on concessions and flexible lease terms in the near term.

Last updated: Q2 2026. Data source: CoStar, data.bls.gov, bizjournals.com. Compiled by the Kidder Mathews Research Group.

Q2 2026 Sacramento Office Market: Key Data Points

Explore our full Sacramento office market review for deeper insights into leasing trends, sale activity, and submarket performance.

• Vacancy Rate Remains Stable: Sacramento’s direct office vacancy rate measured 11.1% in Q2 2026, nearly unchanged from 11.0% a year ago and slightly improved from the prior quarter.
• Availability Continues to Tighten: The total availability rate declined to 13.6%, down from 13.8% one year ago, reflecting reduced sublease inventory and fewer large blocks of available space.
• Positive Net Absorption Continues: The market recorded 75,352 SF of net absorption year-to-date, extending the trend of improving occupancy despite softer overall leasing demand.
• Investment Activity Increases: Office sales volume reached 928K SF year-to-date, a 29.3% increase compared with the same period last year, signaling growing investor interest.
• Asking Rents Moderate: Average asking rents declined to $2.14 PSF full service, down 3.2% year-over-year as landlords continue offering flexibility and concessions to attract tenants.
• Limited New Development Supports Stability: No new office deliveries were completed during the quarter, while the development pipeline remains constrained, helping reduce future supply pressure.

Submarket Statistics

Significant Sale Transactions Q2 2026

Significant Lease Transactions Q2 2026

Significant Under Construction