Tuesday, April 17, 2018

Colliers 1Q 2018 Sacramento Office Research & Forecast

The Sacramento office market has improved to pre-recession levels and according to Colliers, the Sacramento office market is now seen as a safe haven for investors. Rental rates increased 2.7 percent over last year with Class A downtown reaching $3.00 per square foot.

Colliers 2018 1Q Sacramento market indicators

Big investment sales. According to a national office market study published in February by investment auction platform Ten-X listed Sacramento as one of the top five “buys markets” in the U.S. Colliers believes this is true because demand is resilient and the construction pipeline is sparse. The sale of David Taylors 621 Capitol Mall high-rise tower for $161 million set a new standard for Class A per square foot at $439.49.

Colliers 2018 1Q Sacramento summary of statistics

Even with all the positive news, Colliers does not see development in large scale (private high-rise construction downtown) returning to the Sacramento market in the near future. Office rates still do not justify the cost of new construction, hence no new speculative office projects in the first quarter of 2018. Until rents and values rise nearer or replacement costs, we will likely see development in the region to focus on government and healthcare build-to-suit, with any speculative capitol going toward rejuvenating existing spaces or building apartments and warehouses. 
Colliers 2018 1Q Sacramento Office Report