What area is your expertise?
Sacramento region
What trends do you see presently in office development in your area?
Overall construction has slowed compared to the past few years. However, there are still a number of new office projects in the pipeline, which will deliver almost 2.4 million square feet within the next 18 months. Spec development has given way to build-to-suits and pre-leasing, which will benefit vacancy rates in the current market.
Who are the active office developers in your area?
Jackson Properties, Panattoni Development Co., Evergreen, Harsch, and Opus West are active in our area.
Please name one or two significant office developments in your area. What impact will these projects have on the market?
Two high-rise, Class A buildings are under construction on Capitol Mall, delivering nearly 800,000 square feet of new office space combined. 621 Capitol Mall, aka U.S. Bank Tower, will deliver 366,000 square feet/25-stories late 2008, on behalf of David Taylor Interests. 500 Capitol Mall, owned by Tsakopoulos Investments, will provide 430,000 square feet of office space to tenants by fall 2009. While this is a significant amount of space in a short time frame, the strength of the Downtown market should be able to shoulder the absorption, with minor increase in vacancy.
Where is the majority of development taking place? Why is this area doing well?
Downtown, Highway 50 and Folsom markets are all outshining surrounding submarkets. Downtown and Highway 50 have been favorable locations for the public sector, while Folsom continues to attract a variety of private sector businesses, ranging from owner users to build-to-suits.
What area do you expect to be the next big development market? Why?
Highway 50 is showing great strength in attracting the large floor plate, back-office user. Developers have taken notice, and there are a number of under construction and planned projects in the pipeline.
What areas are doing well in terms of office leasing? Which areas are struggling with office leasing?
Again, Downtown, Highway 50 and Folsom are leading the leasing market, with Roseville/Rocklin, North Natomas and Elk Grove experiencing slow activity.
Please give a measure of office vacancy rates. Please give a measure of available sublease space.
Overall Sacramento region vacancy for first quarter 2008 stands at 12.8 percent, with sublease vacancy at 0.8 percent.
What is the status of job growth/(un)employment rates and what bearing will it have on the office market?
Sacramento region’s unemployment rate is currently 6.5 percent, the highest in 11 years. In light of the current economic conditions, this points to tenants downsizing, or staying in a holding pattern, until signs of an improved economy surface.
Is there any type of office tenant absorbing a majority of space? What industries do you expect to expand in the next year to absorb a great deal of office space? What areas will be affected?
Aside from the public sector, Healthcare is exploding in the Sacramento region, with more than 3.5 million square feet of medical space under construction or planned between UC Davis Health System, Sutter Health, Catholic Healthcare West and Kaiser Permanente. Technology and energy sectors are also on the rise.
Would you like to make any additional observations about the office market in your area?
The concept of sustainability in development and workplace environment will continue to gain attention and implementation. LEED certified buildings and green office space are the buzz among developers, corporations (tenants) and legislation. In the coming year, we’ll see more sustainable products and ways of doing business occurring throughout the region.
Submitted by Cara Trani , sales and leasing associate with the Sacramento office of Colliers International. Posted Online 6-9-08.