MARKET DRIVERS
OFFICE availability rates increased 30.9% year-over-year (YOY) from 11.1% in 2Q20 to 14.5% in 2Q21. Sublease space nearly doubled, climbing 73.9% YOY from 709,006 SF in 2Q20 to 1.23 million SF in 2Q21.
LEASING activity increased 16.6% YOY from 588,031 SF in 2Q20 to 685,681 SF in 2Q21. The North Natomas and Roseville-Rocklin areas were the most active markets for the quarter with 115,632 SF and 110,702 SF respectively. Sales volume gained 11.0% YOY from 572,701 SF in 2Q20 to 635,637 SF in 2Q21.
DIRECT asking lease rates have risen 4.52% YOY from $1.99/SF FS in 2Q20 to $2.08/SF FS in 2Q21. Quarter-over-quarter changes in asking lease rates remained flat.
DIRECT net absorption rose to 20,142 for 2Q21. YTD direct net absorption is still negative 672,276 SF.
THERE are currently 2.3 million SF of office buildings in the construction pipeline.
ECONOMIC OVERVIEW
THE Sacramento metropolitan area reopened the economy on June 15, when California removed most COVID-19 restrictions. The release of these mandates mean that companies can implement their plans to have employees return to offices and stoke demand for office space.
CALIFORNIA unemployment stood at 7.5% for May 2021, with the Sacramento – Roseville – Arden-Arcade Metropolitan Statistical Area reporting a 6.3% unemployment rate.
NEAR-TERM OUTLOOK
DIRECT asking lease rates are expected to remain steady. Increased vacancies, sublease availabilities, and remote work measures place significant downward pressures on starting lease rates. Short-term leases become common as companies gauge how quickly the Sacramento economy reacts to the state reopening.