Sacramento Office Market Report

The following reflects Sacramento office market conditions as of Q3 2026.

MARKET DRIVERS

Sacramento’s office market remained relatively stable during Q3, with direct vacancy holding at 11.0% despite modest negative net absorption of approx. 37K SF. While leasing activity moderated during the quarter, occupancy growth remains limited, reinforcing a broader trend of stabilization rather than meaningful expansion.

Leasing activity totaled approx. 514K SF during Q3, bringing YTD volume to 1.85M SF, down 12.3% from the comparable period in 2025. Demand continues to be driven primarily by smaller and mid-sized occupiers, while larger space requirements remain limited as tenants maintain a cautious approach to long-term space commitments.

Market conditions continue to favor tenants, with landlords remaining flexible on concessions and lease structures to secure occupancy. Demand remains strongest for well-located, higher-quality properties with modern amenities and efficient layouts, while older commodity office buildings continue to experience greater leasing challenges and longer absorption timelines.

Government occupancy trends remain an important influence on the market. The state’s continued consolidation of agencies into state-owned facilities has reduced some traditional leasing requirements; however, increased in-office attendance among state employees could provide incremental support for Downtown activity and government-related demand over time.

New development remains limited, with roughly 164,000 SF under construction and no new office deliveries recorded during Q3. The constrained development pipeline should help support longer-term market fundamentals as existing vacancies are gradually absorbed. Investment activity also improved during the quarter, although buyers remain selective and focused on well-occupied properties, strong tenant credit and owner-user opportunities.

ECONOMIC OVERVIEW

The unemployment rate in the Sacramento-Roseville-Folsom MSA increased to 5.2% in August 2026, up from 4.2% in May 2026, but remained slightly below the year-ago rate of 5.4%. This compares to 5.1% for the state of California and 4.1% nationally during the same period.

Sacramento continues to benefit from its relatively diverse employment base and concentration of government and healthcare users, which have helped provide stability despite softer demand from traditional office-using industries. However, slower employment growth and reduced space requirements among professional firms continue to temper broader office demand.

NEAR-TERM OUTLOOK

Sacramento’s office market is expected to remain relatively stable through the remainder of 2026. YTD leasing activity remains below 2025 levels, while negative Q3 absorption and higher availability reflect continued softness in tenant demand. Despite these headwinds, vacancy has remained relatively stable, suggesting market conditions are holding steady even as occupiers remain cautious with space requirements.

Conditions should remain favorable for tenants as landlords continue to rely on concessions and flexible lease structures to drive transactions. At the same time, limited new construction should help prevent significant additional supply pressure. Recovery is expected to remain gradual and increasingly differentiated by asset quality and location, with modern, well-located properties positioned to outperform older and less competitive buildings.

Frequently Asked Questions

What is the office vacancy rate in Sacramento in Q3 2026?

The Sacramento office direct vacancy rate was 11.0% in Q3 2026, unchanged from both Q2 2026 and Q3 2025, according to Kidder Mathews research. The total vacancy rate was 11.3% (Data source: CoStar). Direct vacancy ranged from 2.1% in Elk Grove to 23.9% in South Natomas across Sacramento submarkets.

What is the office availability rate in Sacramento as of Q3 2026?

The Sacramento office total availability rate was 13.9% in Q3 2026, up 40 bps from 13.5% in Q3 2025 and up from 13.3% in Q2 2026, according to Kidder Mathews research. By building class, availability was 17.3% for Class A, 15.3% for Class B and 7.4% for Class C. Among submarkets, South Natomas had the highest availability at 29.2% and Elk Grove the lowest at 4.4% (Data source: CoStar).

How much office space was leased in Sacramento in Q3 2026?

Sacramento office leasing activity totaled 514,209 SF in Q3 2026, according to Kidder Mathews research. Year-to-date leasing reached 1,851,645 SF, down 12.3% from 2,111,673 SF in the same period of 2025. Roseville/Rocklin led all submarkets with 104,012 SF leased in the quarter, and demand continues to be driven primarily by smaller and mid-sized occupiers (Data source: CoStar).

What was net absorption for Sacramento office space in Q3 2026?

Sacramento office net absorption was -36,593 SF in Q3 2026, meaning occupied space declined by about 37K SF during the quarter, according to Kidder Mathews research. Net absorption measures the change in occupied space over a period, so a negative figure means more space was vacated than was newly occupied. Year-to-date net absorption was 7,019 SF, compared with 349,475 SF in the first three quarters of 2025, a 98.0% decrease. Downtown recorded the largest quarterly decline at -81,921 SF, while the Highway 50 Corridor posted the largest gain at 58,188 SF (Data source: CoStar).

What are average office asking rents in Sacramento in Q3 2026?

The average direct asking lease rate for Sacramento office space was $2.15 per SF per month on a full-service basis in Q3 2026, down 1.9% from $2.19 in Q3 2025 and up from $2.14 in Q2 2026, according to Kidder Mathews research. Submarket average rental rates ranged from $1.36 in Rio Linda/N Highlands to $3.02 in Elk Grove. By class, average rates were $2.44 for Class A, $2.07 for Class B and $1.91 for Class C (Data source: CoStar).

How do Class A, B and C office buildings compare in Sacramento in Q3 2026?

Class A and Class B Sacramento office buildings had higher vacancy than Class C in Q3 2026, according to Kidder Mathews research. Direct vacancy was 13.7% for Class A, 12.0% for Class B and 6.1% for Class C. Net absorption was -32,280 SF for Class A and -64,926 SF for Class B, while Class C was positive at 60,613 SF (Data source: CoStar).

How much office space is under construction in Sacramento in Q3 2026?

Roughly 164,000 SF of office space was under construction in Sacramento in Q3 2026, and no new office deliveries were recorded during the quarter, according to Kidder Mathews research. Significant projects include 3185 McCarthy Way in Folsom, a 92,000 SF building owned by Dignity Health scheduled for delivery in 1Q 2027, and Riverpoint North Corporate Center – Bldg B in West Sacramento, a 38,350 SF project owned by Buzz Oates scheduled for delivery in 3Q 2027.

What was the largest office sale in Sacramento in Q3 2026?

The largest Sacramento office sale in Q3 2026 was 1386 Lead Hill Blvd – Bldg C in Roseville/Rocklin, a 42,195 SF building that sold for $19,000,000, or $450.29 per SF, according to Kidder Mathews research. JLL Income Property Trust was the buyer and MCR Companies was the seller. Total sales volume was 677,706 SF in Q3 2026 and 1,612,028 SF year to date, up 36.9% from 1,177,818 SF in the same period of 2025 (Data source: CoStar).

What was the largest office lease in Sacramento in Q3 2026?

The largest Sacramento office lease in Q3 2026 was 21,096 SF at 1601-1651 Alhambra Blvd in East Sacramento, signed in August 2026 by Ambulatory Surgery Center with landlord Fulcrum Property, according to Kidder Mathews research. The second-largest was 19,634 SF at 500 Capitol Mall in Downtown, leased by Kimley-Horn from Tsakopoulos Investments in July 2026 (Data source: CoStar).

What are the largest office submarkets in Sacramento in Q3 2026?

Downtown is the largest Sacramento office submarket with 23,492,912 SF of inventory in Q3 2026, followed by the Highway 50 Corridor at 17,864,062 SF and Roseville/Rocklin at 12,564,934 SF, according to Kidder Mathews research. The overall Sacramento office market totals 105,078,285 SF. Downtown had a direct vacancy rate of 9.5% and an average rental rate of $2.84 per SF per month (Data source: CoStar).

What is the Sacramento office market outlook for the rest of 2026?

Sacramento’s office market is expected to remain relatively stable through the remainder of 2026, according to Kidder Mathews research. Year-to-date leasing remains below 2025 levels, and negative Q3 absorption and higher availability reflect continued softness in tenant demand. Conditions should remain favorable for tenants, limited new construction should prevent significant additional supply pressure, and recovery is expected to be gradual and differentiated by asset quality and location.

What is the unemployment rate in the Sacramento area as of August 2026?

The unemployment rate in the Sacramento-Roseville-Folsom MSA was 5.2% in August 2026, up from 4.2% in May 2026 but slightly below the year-ago rate of 5.4%, according to Kidder Mathews research. This compares with 5.1% for California and 4.1% nationally (Data source: data.bls.gov). Sacramento’s diverse employment base and concentration of government and healthcare users have helped provide stability despite softer demand from traditional office-using industries.

Last updated: Q3 2026. Data source: CoStar, data.bls.gov, bizjournals.com. Compiled by the Kidder Mathews Research Group.

Q3 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 and availability: Direct vacancy held at 11.0%, unchanged year over year and quarter over quarter, while total availability rose to 13.9% from 13.5% in Q3 2025.
Net absorption: Net absorption was -36,593 SF in Q3 2026, bringing the year-to-date total to 7,019 SF versus 349,475 SF in the same period of 2025.
Leasing activity: Leasing totaled 514,209 SF in Q3 2026 and 1,851,645 SF year to date, down 12.3% from 2025.
Asking rents: The average direct asking lease rate was $2.15 per SF per month, down 1.9% from $2.19 a year earlier.
Sales volume: Sales volume reached 677,706 SF in Q3 2026 and 1,612,028 SF year to date, up 36.9% from 1,177,818 SF in 2025.
Construction: Roughly 164,000 SF was under construction, with no new office deliveries recorded during the quarter.
Largest sale: 1386 Lead Hill Blvd – Bldg C in Roseville/Rocklin sold for $19,000,000 ($450.29 per SF) to JLL Income Property Trust.

Submarket Statistics

Sacramento Office Submarket Statistics 3Q26: includes Downtown, Auburn/Lincoln, Campus Commons, Carmichael/Fair Oaks, Citrus Heights/Orangevale, Davis/Woodland, East Sacramento, El Dorado, Elk Grove, Folsom, Highway 50 Corridor, Howe Ave/Fulton Ave/Watt, Midtown, North Natomas, Point West, Rio Linda/N Highlands, Roseville/Rocklin, South Natomas, South Sacramento, West Sacramento, the market total, and Class A, Class B and Class C breakdown
Submarket	Total Inventory (SF)	Direct Vacancy Rate	Total Vacancy Rate	Total Availability Rate	3Q26 Direct Net Absorption (SF)	3Q26 Total Leasing Activity (SF)	YTD Leasing Activity (SF)	Average Rental Rate (FS)
Downtown	23,492,912	9.5%	9.7%	10.6%	-81,921	52,193	356,480	$2.84
Auburn/Lincoln	1,697,164	6.6%	6.6%	6.9%	8,815	4,736	20,980	$1.90
Campus Commons	1,710,997	6.6%	6.6%	14.2%	7,848	5,104	31,877	$2.53
Carmichael/Fair Oaks	1,586,156	12.9%	12.9%	13.5%	4,682	13,629	23,336	$1.86
Citrus Heights/Orangevale	1,819,510	5.9%	6.3%	8.0%	23,186	22,624	55,951	$1.78
Davis/Woodland	2,627,517	7.9%	7.9%	8.5%	10,782	20,393	38,271	$2.94
East Sacramento	3,161,232	7.5%	7.6%	8.2%	-19,261	21,096	43,377	$2.78
El Dorado	2,421,573	10.1%	10.1%	11.8%	-35,000	12,143	67,044	$2.22
Elk Grove	2,394,656	2.1%	3.0%	4.4%	12,497	9,132	64,197	$3.02
Folsom	6,224,769	8.1%	8.6%	14.8%	19,908	28,686	104,659	$2.45
Highway 50 Corridor	17,864,062	16.6%	17.0%	20.6%	58,188	35,081	232,725	$1.79
Howe Ave/Fulton Ave/Watt	5,228,586	12.9%	12.9%	14.1%	-55,939	9,625	43,888	$1.61
Midtown	4,493,300	8.2%	8.3%	10.5%	10,369	22,375	69,526	$2.44
North Natomas	3,774,022	12.4%	13.4%	25.1%	7,946	29,842	111,388	$1.96
Point West	2,819,811	19.1%	19.2%	25.1%	19,574	38,315	80,592	$1.99
Rio Linda/N Highlands	1,068,093	8.9%	8.9%	8.8%	3,418	8,979	11,435	$1.36
Roseville/Rocklin	12,564,934	9.3%	9.5%	11.1%	-19,540	104,012	323,735	$2.21
South Natomas	3,850,834	23.9%	24.5%	29.2%	-27,631	37,263	89,118	$2.19
South Sacramento	3,753,656	5.0%	5.0%	6.4%	14,441	34,000	56,951	$1.77
West Sacramento	2,524,501	6.5%	6.5%	5.8%	1,045	4,981	26,115	$2.29
Total	105,078,285	11.0%	11.3%	13.9%	-36,593	514,209	1,851,645	$2.15
Class A	25,273,300	13.7%	14.4%	17.3%	-32,280	187,868	653,824	$2.44
Class B	54,638,967	12.0%	12.2%	15.3%	-64,926	230,664	909,425	$2.07
Class C	25,166,018	6.1%	6.1%	7.4%	60,613	95,677	288,396	$1.91

Significant Sale Transactions Q3 2026

Sacramento Office Significant Sale Transactions Q3 2026
Property	Submarket	SF	Sale Price	$/SF	Buyer	Seller
1386 Lead Hill Blvd – Bldg C	Roseville/Rocklin	42,195	$19,000,000	$450.29	JLL Income Property Trust	MCR Companies
750 Riverpoint Dr	West Sacramento	100,000	$11,000,000	$110.00	City of West Sacramento	Toor Capital, LLC
2101 K St	Midtown	25,600	$7,800,000	$304.69	Welbe Health	Kitchell
905 Secret River Dr	South Sacramento	10,749	$4,000,000	$372.13	Chiamulon Family Properties, LP	Adriatik Rama
1919 19th St	Midtown	18,685	$3,200,000	$171.26	California Interscholastic Federation	S Street Group

Significant Lease Transactions Q3 2026

Sacramento Office Significant Lease Transactions Q3 2026
Property	Submarket	SF	Transaction Date	Landlord	Tenant
1601-1651 Alhambra Blvd	East Sacramento	21,096	August 2026	Fulcrum Property	Ambulatory Surgery Center
500 Capitol Mall	Downtown	19,634	July 2026	Tsakopoulos Investments	Kimley-Horn
255 Parkshore Dr	Folsom	17,793	September 2026	Kingsbarn Realty Capital	Undisclosed
1480 Drew Ave	Davis/Woodland	17,339	July 2026	URP Investors	Elve
10360 Placerville Rd	Highway 50 Corridor	14,810	July 2026	First American CoreLogic, Inc.	AIMS

Significant Under Construction

Sacramento Office Significant Under Construction Q3 2026
Property	Address	Submarket	SF	Owner	Delivery Date
3185 McCarthy Way	3185 McCarthy Way	Folsom	92,000	Dignity Health	1Q 2027
Riverpoint North Corporate Center – Bldg B	700 Riverpoint Dr	West Sacramento	38,350	Buzz Oates	3Q 2027

Data as of Q3 2026. Source: CoStar, data.bls.gov, bizjournals.com. Prepared by the Kidder Mathews Research Group.

Contact

GARY BARAGONA
Vice President, Research
gary.baragona@kidder.com
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