Market Outlook 2025
Sacramento CRE
Sacramento’s office market ended 2024 with near-record vacancy at 21.5%, driven by State consolidation to owned buildings and private sector downsizing. Despite this, leasing activity rose 5.9% year-over-year, and annual net absorption improved by 24.7%. Investment activity also picked up, with 400 Capitol Mall selling for $117 million. As State move-outs conclude in early 2025, availability is expected to stabilize, setting the stage for a gradual recovery in leasing demand and investor confidence in the coming quarters.
Office
Sacramento’s industrial market stabilized in 2024, ending the year with a 6.5% vacancy rate, as new supply outpaced demand, leading to the first annual occupancy loss since 2012. Leasing activity rose 6.2% year-over-year as large users are returning to the market. Sales volume and pricing also posted notable gains. With new construction slowing and tenant demand rebounding, 2025 is expected to bring modest growth and a return to normalcy following several years of unprecedented expansion in both supply and demand.
Industrial
Sacramento’s multifamily market saw record-high renter demand last year, with 4,991 units absorbed – pushing occupancy to 95.5%, its highest level since Q3 2022. Annual rent growth stabilized at 1.4%, while sales volume surged 50.2% year-over-year to $595 million. Top-performing submarkets included Natomas, South Sacramento/Elk Grove, and Roseville/Rocklin. With construction activity down 40.6% year-over-year and demand holding steady, 2025 should see stable fundamentals while investment momentum accelerates, potentially leading to higher sales volume and a slight rise in pricing.
Multifamily
Despite inflationary pressures, economic uncertainty, and slower population growth, Sacramento’s retail market remained resilient in 2024. Vacancy edged up to 7.7%, increasing just 10 basis points year-over-year, while net absorption for the year totaled 215,000 square feet. Low availability and limited new construction impacted leasing, but annual leasing volume still rose 4.6% year-over-year to 1.9 million square feet. However, retail sales volume fell to $613 million, well below recent years, reflecting cautious investor sentiment despite steady tenant demand.
Retail
Investment activity gained momentum in late 2024 as the bid-ask spread narrowed and deal flow increased heading into 2025. Office sales were driven by distressed assets, with opportunistic buyers leading transactions. Buzz Oates’ acquisition of 400 Capitol Mall at a 41% discount from its 2019 price accounted for 27% of annual office volume. Industrial volume grew 22% year-over-year, with pricing rebounding after a correction in 2023. Multifamily sales recovered significantly, with prices rising 7.1% year-over-year, signaling renewed investor confidence.
Capital Markets
Sacramento’s economy showed signs of slowing in 2024, with annual job growth at 1.0% (11,500 jobs), down from 2.6% in 2023. Healthcare led employment gains, accounting for 98% of all new jobs, while State & Local Government expanded 1.6% year-over-year. Meanwhile, Professional Services grew modestly (+0.7%), but Construction, Manufacturing, Finance, and Information sectors all posted year-over-year declines. The unemployment rate stood at 4.6% in December 2024, up from 3.7% in April but steady year-over-year. Lingering economic uncertainties will shape Sacramento’s job market and business growth outlook in 2025.
Economy
Sacramento Research Reports
Q4 2024 Sacramento Office Market Report
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Q4 2024 Sacramento Industrial Market Report
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Q4 2024 Sacramento Multifamily Market Report
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Q4 2024 U.S. Office Market Outlook Report
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CRE Outlook 2025
Randy Dixon
Regional Managing Director
+1 916 563 3023
Randy.Dixon@colliers.com
Bob Shanahan
Research Director
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Marketing Director
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Design Manager
+1 916 563 3049 Misha.Huppert@colliers.com
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Sacramento’s medical outpatient market maintained a stable 6.6% vacancy rate at year-end 2024 following 154,000 square feet of annual net absorption. Asking rents increased 1.2% year-over-year, a moderation from 2023. New supply totaled 132,000 square feet in 2024, with 398,000 square feet still under construction. Annual sales volume, driven by large acquisitions by Hines, Welltower, and IRA Capital, shot up to $181.4 million, five times higher than 2023. The average sale price of $340 per square foot increased 19.1% year-over-year in 2024 while cap rates ended the year at 7.12%, roughly level from 2023.
Healthcare
Sacramento’s life sciences market remains in a period of slower activity, with less leasing and investment since venture capital money has moved to the sidelines. However, the sector will see a major milestone in 2025 with the delivery of Aggie Square. Despite slower demand, Sacramento’s affordability and proximity to top-tier research at UC Davis position it well for long-term expansion as the sector improves. Future transformative projects by Fulcrum and Blue Rise Ventures at Capitol Innovation District and BioSpace are slated to capitalize on ag-tech and biotech companies’ recovery.
Life Sciences