Future Cities
Emerging Industrial Markets: Sacramento
February 11, 2022
Sacramento developers are meeting the demands of e-commerce and logistics companies with state-of-the-art big-box facilities that previously had been in limited supply. With 3.9 million people in the Sacramento region, there is strong consumer demand for last-mile delivery of e-commerce products. Heading into the pandemic, the region had both the land and the workforce to accommodate the growing industrial market. Since the pandemic began, 6.1 million sq. ft. of industrial & logistics space has been delivered, with 4.5 million sq. ft. of that in 2021 alone. With large tenants either expanding in or entering the market, this new space has been quickly absorbed and led to more development activity.
Demographics
Nearly 3.9 million people live within 50 miles of Sacramento, with a projected growth rate of 4.0% over the next five years. The important 18-to-34 age group accounts for more than 24% of the total population. Within 250 miles, companies can reach 16.7 million consumers.
Figure 1: Sacramento 2021 Population Analysis
Source: CBRE Location Intelligence.
The local warehouse labor force of 32,888 is expected to grow by 7.6% over the next decade, according to CBRE Labor Analytics. The average hourly wage for a non-supervisory employee is $16.98 —13.9% higher than the U.S. national average but below that of other California metros like Stockton and Los Angeles.
Figure 2: Sacramento Warehouse & Storage Labor Fundamentals
Source: CBRE Labor Analytics.
Location Incentives
Over the past five years, there have been 34 economic incentive deals totaling more than $22 million at an average of $16,288 per new job in the Sacramento metropolitan area.
According to CBRE’s Location Incentives Group, among the top incentive programs offered in metro Sacramento is the California Competes Tax Credit, which totals $180 million in discretionary income tax credits available for allocation to businesses that make capital investments, create new jobs and offer strategic importance to the region through 2023. The credits are non-refundable and companies can only apply during designated application periods held three times each year.
Figure 3: Top Incentive Programs
Source: CBRE Location Incentives Group; WAVTEQ Incentives Monitor; January 2017 to December 2021.
Logistics Driver
Sacramento is a vital industrial market that serves a highly populated and growing metro area. E-commerce companies signed new leases totaling more than 1.25 million sq. ft. in 2021. The California capital city has air cargo service via Sacramento International Airport and the regional Mather Airport. Distributors and logistics companies have access to major highway systems at the cross-section of Interstate 80, Highway 50 and Interstate 5.
Sacramento ranked as the No. 1 city in the nation for homebuyers considering relocation and as the top housing market for millennials in 2021, according to Redfin and Realtor.com. A recent study by CBRE Research showed that Sacramento led the nation in terms of resident net move-ins in 2020, with the majority coming from San Francisco . Although largely driven by the COVID pandemic, this influx of residents illustrates the attractiveness of the city for young professionals. Many are avid e-commerce consumers, driving the need for more warehouse and distribution space, especially for last-mile delivery.
Sacramento is a one-day drive from the highly populated areas of eastern Nevada, northern Oregon, Los Angeles and the San Francisco Bay Area.
Supply & Demand
Sacramento has an industrial inventory of 185.4 million sq. ft., 89% of which is in facilities of less than 500,000 sq. ft. Net absorption increased by nearly 160% last year to 6.7 million sq. ft., lowering the vacancy rate to just 2.4%—80 basis points below the national average. The big-box size segment (500,000 sq. ft.+) has a vacancy rate of just 0.9%. The overall average asking rent rose by 13.4% year-over-year.
Construction completions totaled 4.5 million sq. ft. last year, largely in the 100,000-sq.-ft. and above size segment. More than 65% of the new space was fully leased by year’s end. Leasing activity is expected to remain strong in 2022 with continued occupier demand.
Figure 4: Sacramento Historical Data
Source: CBRE Research, Q4 2021
Figure 5: Sacramento Corridor Size Range Comparison
Source: CBRE Research, Q4 2021
1 Warehouse materials handler.
2 WAVTEQ Incentives Monitor, January 2017 to December 2021.
3 “COVID-19 Impact on Resident Migration Patterns”, CBRE Research, April 2021.
4 Source: CBRE Research, Q4 2021
5 Source: CBRE Research, Q4 2021
Emerging Industrial Markets
Spotlighting markets across North America that offer demographic, logistics and incentives advantages for industrial investors and occupiers
Related Insights
Contacts
John Morris
President, Americas Industrial & Logistics, Advisory Services
