sacramento - explore midtown · the office vacancy rate in the sacramento region continued its ......

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Coverage Map & Quarterly Report

Office Market Continues to ImproveThe office vacancy rate in the Sacramento Region continued its slow decline during 2014 finishing the year at an overall rate of 20.12%, down 1.57% from the fourth quarter of 2013. In most parts of the region, this decrease in vacancy rates is nearly undetectable. Nevertheless, we have finished each of the last two years with more occupied space in the region than we began so we can be sure the office market is improving, although much more slowly than economic recoveries in the past. For the record, we had five consecutive years of negative net absorption starting in 2008. During this very bad five year downturn, we lost 2.6 million square feet of occupancy peaking in 2011 when we surrendered an unbelievable 922,000 SF of previously occupied space. During the last two years, we have gained back 1.76 million square feet of that occupancy lowering the vacancy rate over 3 points in the process. With another good year of leasing activity, we should actually be back to even with the occupancy level of 2007. Amazing.

If you own an office building in South Placer County, you are seeing more deals than building owners in the rest of the region. Of the 668,000 square feet of new net absorption in the region last year, nearly 70% of it was in Rocklin and the Douglas Blvd. Corridor in Roseville. The vacancy rate in Rocklin five years ago was over 50%; today it is 21.5%. Granted, it is not a major submarket in size with a total of 1.9 million square feet but it certainly has seen more activity the last few years than most areas in the region. The Douglas Blvd. corridor is on fire and has accounted for the highest volume of new lease deals in the last 24 months. Leasing activity in the rest of the submarkets we measure is fair at best with vacancy rates in several local submarkets continuing to increase. In short, there just aren’t enough deals to go around.Overall, our regional economy continued to improve during 2014 and we are expecting more of the same in 2015. Here are a few reasons for renewed optimism:• Work on the new Downtown Arena is on schedule with the building set to open in the fall of next year in time for the 2016-17 NBA

season! It is impossible to overstate what this new project means to downtown Sacramento and the region. This trophy project is the catalyst for several new hotels, office buildings, and retail developments in the downtown CBD and hundreds of new apartments and condominium units being added;

• Three of the largest employment sectors of our local economy-government, homebuilding and healthcare-continue to add jobs on a selective basis;

• We have a new, well funded and highly focused economic development corporation in the region: GSAC. The Great Sacramento Economic Development Corporation was formed by the CEO’s of the largest companies in the region and they are ‘absorbing’ the former SACTO organization. GSAC has hired Barry Broome, a nationally recognized business recruiter, as its first President and CEO. Mr. Broome will bring higher visibility and awareness of our region’s many attractive assets to national and international companies considering relocations and expansions. This is a very big deal for the region.

For the first time in many years, office rents are increasing in select areas where vacancy is declining. An owner can’t raise lease rates when the vacancy is over 20% but when it gets to 15% or lower, rents will rise. Three areas that are raising rents are the aforementioned Rocklin, Roseville and most recently, the South Natomas area of Sacramento. While the South Natomas vacancy is still high, there are several large tenants seeking space in that desirable submarket in addition to some major expansions going on by existing tenants. The interest level from new tenants and the optimism created by expansions has provided the confidence to increase rents before the vacancy actually justifies it. Regardless, the rental increases in each of these specific submarkets is marginal and will not diminish the current interest level of prospective tenants. As leasing activity strengthens, so does the sales market. Sales across the region are increasing and, in some areas, overlooked infill areas, especially in the downtown and midtown areas of Sacramento, prices are nearing the historic highs of 2006-2007. We expect these prices to continue to increase during the coming year.

To sum it up, it feels as though Sacramento is on a roll and that the future is bright. We have mostly worked through the agonizing layoffs, corporate downsizings, foreclosures, plant closings and burdensome debt of the great recession and we are emerging on the other side. We feel collectively that our future is going to be better and our regional economy is going to be more diverse and more entrepreneurial in its growth. The Sacramento region is a great place to live, work and play. It’s also going to be a great place to grow a business and invest in the future. All the best for a healthy and prosperous 2015!

Sacramento Region Office Report

4th Quarter 2014

Quick Stats Overall Vacancy Rate: 20.12%

Change During Last Qtr: -0.64%

Under Construction: 173,187 SF

Regional Unemployment Rate: 6.5%

Median Resale Price of Single-Family Home in the Region: $268,000

Fourth Quarter 2014


Quarterly Report & Coverage Map

Quarterly Report Fourth Quarter | 2014

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Office Market Summary

Submarket# of

BldgsTotalSF

VacantSF

%Vacant

Vacancy Change

from 3Q14

Net Absorp4Q14

Net AbsorpYTD

SFU/C

Avg FS Asking

Rate

Downtown Class A 20 6,466,261 752,373 11.64% 0.02% (14,188) 74,581 0 $2.60

Downtown Other 121 5,056,499 802,187 15.86% -3.16% 18,897 (22,114) 0 $1.65

Downtown Total 141 11,522,760 1,554,560 13.49% 0.19% 4,709 52,467 0South Natomas 44 3,249,632 790,770 24.33% -0.02% 633 (52,301) 0 $1.90 Point West 40 2,300,056 607,504 26.41% 3.16% (72,672) 82,256 0 $1.70 Tribute Road/Woodlake Bus Park 31 878,384 186,601 21.24% -2.55% 22,370 24,714 0 $1.15 Campus Commons 59 1,637,612 267,896 16.36% -0.57% 9,382 4,721 0 $1.70 50 Corridor West 60 2,730,115 776,918 28.46% 0.25% (8,137) (43,749) 0 $1.65 50 Corridor East 267 11,468,516 2,709,554 23.63% 0.51% (69,628) (198,223) 0 $1.65 Northgate/North Natomas 137 4,119,996 1,051,937 25.53% -1.02% 35,740 9,978 0 $1.75 Howe Corridor 77 1,510,459 440,320 29.15% -1.34% (25,712) (23,792) 0 $1.45 Watt Corridor 55 1,436,973 360,655 25.10% -1.91% 61,074 51,291 0 $1.35 Roseville 133 3,619,886 730,087 20.17% -0.04% 52,448 29,004 55,140 $1.80 Roseville-Douglas Corridor 97 3,560,000 571,365 16.05% -1.37% 48,724 202,431 0 $1.95 Rocklin 82 1,878,976 405,029 21.56% -3.56% 66,881 253,878 0 $1.60 West Sacramento 56 2,512,714 356,532 14.19% -1.95% 48,963 96,291 110,157 $1.45 Folsom 97 2,869,326 502,010 17.50% -2.18% 27,278 75,230 7,890 $1.75 El Dorado Hills 110 1,984,558 379,677 19.13% -2.61% 52,169 3,732 0 $1.60 Midtown/East Sacramento 94 2,968,743 408,537 13.76% 0.82% (23,799) (14,637) 0 $1.75 North Sacramento 26 1,163,711 404,403 34.75% 3.34% (38,871) (43,552) 0 $1.40 Orangevale/Citrus Heights 51 1,236,044 243,030 19.66% -0.35% 4,302 (13,542) 0 $1.30 South Sacramento 56 1,537,163 259,794 16.90% -3.32% 51,928 64,303 0 $1.60 Elk Grove 55 1,293,381 182,690 14.12% -1.01% 13,102 31,259 0 $1.85 Carmichael/Fair Oaks 35 420,486 68,391 16.26% 0.68% 35,491 76,653 0 $1.40

METROPOLITAN TOTAL: 1,803 65,899,491 13,258,260 20.12% -0.64% 296,375 668,412 173,187

NOTE: This survey measures office buildings larger than 5,000 square feet and excludes owner-occupied space, government-owned buildings and medical buildings.*Construction has halted on this West Sacramento building

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Roseville

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FairOaks

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DowntownMidtownSouth NatomasNorthgateWest SacramentoSouth SacramentoElk Grove/LagunaPoint WestTribute Road/WoodlakeHowe CorridorWatt CorridorCampus CommonsOrangevale/Citrus HeightsCarmichael/Fair OaksMcClellan/Hwy 8050 Corridor West50 Corridor EastFolsomEl Dorado HillsRosevilleRocklinLoomis/Auburn/NewcastleLincolnWoodland/Davis

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OFFICE AREASHistorical Vacancy Rate

Historical Vacancy Rate

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Vaca

ncy

Perc

enta

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Year


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Office Market Historical Statistics

Historical Vacancy Rates

Historical Net Absorption

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Vaca

ncy

Perc

enta

ge

Year

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Squa

re F

eet

Year

Historical Net Absorption

Fourth Quarter 2014


Quarterly Report


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Office Market Historical Statistics

Net Absorption by Submarket

Historical Vacancy Rate and Office Space Under Construction

-250,000 -200,000 -150,000 -100,000 -50,000 0 50,000 100,000 150,000 200,000 250,000 300,000

Downtown - Class "A"

Downtown

South Natomas

Point West

Campus Commons

50 Corridor West

50 Corridor East

Northgate/North Natomas

Howe Corridor

Watt Corridor

Roseville

Roseville-Douglas Corridor

Rocklin

West Sacramento

Folsom

El Dorado Hills

18.00%

19.00%

20.00%

21.00%

22.00%

23.00%

24.00%

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

Vac

ancy

Per

cent

age

Squ

are

Feet

SF Under Construction Vacancy Percentage


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Office Market Highlights

Significant Fourth Quarter 2014 Lease Transactions (Deals that occupied or signed during the fourth quarter)

Tenant Address Square FeetUC Davis Medical Group 3160 Folsom Blvd., Sacramento 91,527Maximus* 625 Coolidge Drive, Folsom 72,500Gateway Community Charters 2945 Ramco Street, West Sacramento 32,813California Earthquake Authority* 801 K Street, Sacramento 30,450CLC, Inc. 3001 Lava Ridge Court, Roseville 29,766State of California Department of Industrial Relations* 2424 Arden Way, Sacramento 27,945State of CA Department of Corrections & Rehabilitation* 10111 Old Placerville Road, Sacramento 25,354Kaiser Permanente* 7880 Alta Valley Drive, Sacramento 23,135

* Renewal

Significant Fourth Quarter 2014 Sale Transactions

Address Buyer Seller Square Feet1325 J Street, Sacramento The Bluestone Group UrbanAmerica LP 368,9856020 & 6030 W Oaks Blvd., Rocklin KBS REIT II The Opus Group 219,402501 J Street, Sacramento Kaiser Permanente LNR Property Corporation 178,7354600-4650 Northgate Blvd., Sacramento Avistone, LLC Balboa Investment Group 139,5862525 Natomas Park Drive, Sacramento MKD Investments LP TA Associates Realty 97,1532400 Venture Oaks Way, Sacramento Bayview Property, LLC Lum Yip Kee Ltd 77,207101 Blue Ravine Road, Folsom Agilent Technologies, Inc. Tesoro Blue Ravine LLC 53,416


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* Renewal




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* Renewal



Historical Vacancy Rate & Office Space Under Construction


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* Renewal



Fourth Quarter 2014


Sacramento & Roseville Agent Roster

Northern California office locations

Regional Manager

Devon AtleeManaging Director(916) [email protected]

Staff

Carole PaciniAdministrative Office Manager(916) [email protected]

Kelly DongMarket Research Coordinator(916) [email protected]

Office Division – Sacramento

David Brandenburger(916) [email protected]

Craig Brinitzer(916) [email protected]

Dan Chamberlain(916) [email protected]

Rich Ellsworth(916) [email protected]

Todd Eschelman(916) [email protected]

John Frisch (916) 569-2309 [email protected]

Matt Heacox(916) [email protected]

Tom Heacox(916) [email protected]

Breanna Hegseth(916) [email protected]

Kirk Lange(916) [email protected]

Lucas Lugo(916) [email protected]

Mike Muljat(916) [email protected]

Ali Nadimi(916) [email protected]

Michael Riley (916) [email protected]

Murray Wachtel(916) [email protected]

Office Division – Roseville

Zac Collie(916) [email protected]

Kim Collins(916) [email protected]

Tom Conwell, Jr.(916) [email protected]

Bob Feld(916) [email protected]

Elaine Hartin(916) [email protected]

Chris Lemmon(916) [email protected]

Curt Munger(916) [email protected]

Sue Nelson(916) [email protected]

EmeryvilleT: (510) 923-6200F: (510) 923-6260

HaywardT: (510) 300-0200F: (510) 300-0201

MarinT: (415) 526-7676F: (415) 526-7679

Palo AltoT: (650) 322-2600F: (650) 321-0719

PleasantonT: (925) 467-0900F: (925) 467-0911

San FranciscoT: (415) 445-8888F: (415) 445-8885

San Mateo T: (650) 341-5800F: (650) 341-7024

Leased Investment GroupT: (415) 373-4060F: (415) 373-4060

Santa ClaraT: (408) 727-9600F: (408) 988-6340

Santa RosaT: (707) 583-8400F: (707) 583-8499

Walnut CreekT: (925) 974-0100F: (925) 974-0123

SacramentoT: (916) 920-4400F: (916) 920-0854

RosevilleT: (916) 367-7000F: (916) 367-6362

sacramento - explore midtown · the office vacancy rate in the sacramento region continued its ......

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