Sacramento Skyline Office Rents Buck National Trend

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July 18, 2016

By: Leo Canale, Senior Marketing Associate, JLL

Asking rents in the sixteen Sacramento CBD Class A office buildings that collectively make up JLL’s Skyline set reached $34.80 at the end of the first quarter 2016, up 8.4 percent from a year earlier.

Rents haven’t yet crept back up to the $37-plus level they saw in 2007, but they are more than $3.00 ahead of the market low set in 2014.  While JLL’s 2016 Skyline shows that rent growth nationally may be moderating, especially in high-growth markets that have recorded consistent rent appreciation over the last several years, a steady dwindling of space in downtown Sacramento may indicate more rent gains are ahead in 2016.

 

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The Skyline graphic (above) shows a market with just 13.1 percent vacancy and a diminishing amount of large block space availability.  With no Skyline buildings currently under construction – developments such as Vanir Tower are still going through entitlements —  and increasing tenant demand for space downtown as a result of the development of the Kings’ downtown arena and surrounding amenities, rent gains seem likely.

It’s not all wine and roses for landlords, though.  Tenants do have options, so staying ahead of the competition and positioning buildings – even gold standard assets like the Skyline set — to appeal to a broad range of tenancies, is key.

“Rooftop decks, plenty of open space and wellness are huge factors that will increase an asset’s value in the years ahead and owners should make investments in these common areas if they want to continue to attract the best tenants,” says Greg Levi, Managing Director. It’s worth mentioning that Sacramento’s downtown urban core has seen a steady increase of millennial transplants from the Bay Area, now making up more than 42 percent of Sacramento’s working population.

For more on downtown redevelopment and the positive energy in Sacramento’s downtown market, visit JLL.com/TheGrid

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