Business & Real Estate

Sacramento region’s office vacancy rate rises in third-quarter U-turn

The Sacramento region’s vacancy rate for office space, which has been gradually declining over the past three years, did a U-turn in this year’s third quarter, according to Newmark Cornish & Carey’s regional office.

The third-quarter vacancy rate was 21.4 percent, up from 19.2 percent in this year’s second quarter and 20.75 percent in the third quarter of 2014. The second quarter was the first time that the region’s vacancy rate had dipped below 20 percent since the first quarter of 2009.

The region’s vacancy rate peaked at a record 23.74 percent in the first quarter of 2012.

“The increase in the vacancy rate means that we ended the (third) quarter with 411,000 more square feet of vacant office space than when we began,” said John Frisch, senior managing director of the brokerage firm’s regional office. He added that third-quarter vacancy increases were widespread and included the previously hot submarkets of Rocklin and Roseville.

Frisch said: “Basically, there are too few deals to go around.”

In the current regional market, he added, rents and tenant incentives in Class A buildings are aggressive, so tenants have opted to upgrade while shopping the market. Meanwhile, B and C class buildings are languishing in a soft market, dovetailing with historic trends.

Frisch said the Class A vacancy rate in downtown Sacramento came in at a relatively low 13 percent, which he said was a byproduct of new leasing activity associated with construction of the new downtown arena.

Mark Glover: 916-321-1184, @markhglover