Sacramento Industrial Market Report

Distribution backstops tenant demand. By connecting the Port of Oakland to the Central Valley, Sacramento attracts demand from logistics companies and retailers looking to set up regional networks. Exemplifying this, each of the four largest scheduled move-ins this year are for distribution centers along Interstate 5. These commitments — totaling 888,000 square feet — will help keep metro vacancy under the five-year mean of 4.3 percent, while contributing to sparse local truck parking availability. At the same time, conditions may be even tighter for smaller warehouses, with a nominal amount of vacant last-mile spaces existing in the market. Even with this momentum, headwinds may be emerging. Residential out-migration is currently outpacing relocations to Sacramento, raising concerns for consumption and space absorption from local service providers and businesses. Builders seem to share this view, with 90 percent of 2023 completions occurring as 100,000 square-foot-plus distribution centers, while a limited selection of warehouses come online. Despite this delivery composition, the metro should remain in flux near term. Over 72 percent of this year’s pipeline was available for lease as of February.