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Floor-by-floor Class A office space available in downtown Sacramento |
This is encouraging news… downtown Sacramento Class A office vacancy rate is
now 8.1%. Of the 16 existing high-rise buildings downtown, most are more than
90% leased.
Colliers International has done the research to show
floor-by-floor availability where the current asking rate per square feet
is $3.19. Presently the only new office space under construction
downtown is by the State of California, but these will not increase
available space for the private sector. The lack of office space availability
in downtown has edged up the asking price per-square-foot, but not enough to
justify building a new high-rise.
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Floor-by-floor Class A office space available in downtown Sacramento |
How much do prices have to rise before it would be profitable to build a
high-rise office downtown? Four years ago in 2015,
Greg Levi a managing
director with Jones Lang LaSalle Sacramento was quoted saying "Though
rents are rising, though, they’re not high enough to bring construction cranes
just yet. The highest rents, around $3.10 a square foot, are still about 40
cents below what a brand-new building would have to charge,” Levi said.
So
essentially Greg’s saying that rents would have to rise an additional 40 cents
a square foot before it would be profitable to build this high-rise downtown…
that’s a 13% increase. In the last four years construction material costs have also
gone up so I think the 40 cent increase is now not enough and rents would possibly have
to rise even higher that, maybe as much as $3.50SF for construction to pencil
out. With the economy staying strong, we might reach a point where the private
sector jumps in to build. 301 Tower is marketing its proposed tower on Capitol
Mall but the Vanir Tower on J Street has ghosted and no one has heard a peep
from them in months.
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Sacramento skyline market vacancy and asking rate 1Q 2019 |
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Sacramento market statistics 1Q 2019 |
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