Sacramento High-Rise Availability - 1Q 2019

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.

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.

Sacramento skyline market vacancy and asking rate 1Q 2019

Sacramento market statistics 1Q 2019