Colliers Sacramento Office Snapshot: Q2 2023

The Sacramento vacancy rate has hit 20% with a negative net absorption of -279,278 square feet. Sales appear to also be down because of higher barrowing costs. As reported by Colliers Sacramento, the local unemployment rate was 3.9 in May with employed persons at 1.09 million, but local layoffs have stated to increase so far this year.

As of June 2023, there were only 13 office buildings in the Sacramento region that were potentially troubled, in special servicing, or in foreclosure, totaling 1.68 million square feet of space and $163 million in loan value, according to MSCI Real Capital Analytics, which equates to less than three percent of the office market. Through Q1 2023, some $4.1 billion of new office assets were added to the troubled group of office properties nationally and more loans are set to mature in the office sector than any other asset class.

The Judicial Council of California’s new Sacramento County Courthouse located on the southeast corner of The Railyards north of Downtown will be completed in the next nine months. North of The Railyards, the State of California’s 1.25 million square foot Richards Boulevard Complex in The River District is due to be completed by Q1 2024. This project will kickstart the consolidation of multiple state government departments into these brand-new buildings and is expected to be a catalyst for ongoing development in this emerging mixed-use district. CalSTRS’ new building at 200 Waterfront Place is due to deliver in Q3 2023, which will bring 200,000 square feet of available space in its current 100 Waterfront Place building into the vacancy column.

Demolition begins On Capitol Annex

The term "Demolition by Neglect" fits the current state of the Capitol Annex that is now being demolished. For decades the State failed to properly maintain and upgrade the Capitol Annex, therefore it is now in disrepair and needs to be torn down. State legislators for nearly 70 years didn't even do the minimum to keep the structure up to code or make any upgrades throughout the life of the structure. The budget to replace the Annex is currently $1.4 billion, as you know, this estimate will be way under budget when the project is completed in five or six years. It was only three years ago when the proposal was estimated to be $775 million. The State doesn't even have a rendering of the replacement building to show the public, just another reason why public trust of all politicians is at an all time low.