Companies continued to suck up available space during the third quarter of 2016 in the Sacramento regional market. Kidder Mathews tracked 360,783 square feet of absorption in July through September, bringing the vacancy rate to 12.2 percent. Kevin Sheehan, managing partner at Kidder Mathews, said he believes the office market is the strongest it’s been in at least four years. Here are more insights:
1. Squeeze for space
Sheehan said much of the activity is fueled by a lack of new space coming online in recent years.
2. Looking at second choices
With no new space, and the existing best space gobbled up, more firms are looking at class B/C buildings as an option, Sheehan said.
3. Gap still seen in rents
To build a new suburban office building would cost $2.70 a square foot, Sheehan said. Even the best Highway 50 corridor buildings are at about $1.85 a square foot now.
4. Downtown has ingress, egress
Some firms are still looking for downtown Sacramento space, but others, concerned about traffic, would like to be somewhere a bit more sedate.
5. Strong winds to keep blowing
Not only do most experts expect the fourth quarter to remain positive, they expect all of 2017 to be positive as well, Sheehan said.
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