Sacramento Commercial Real Estate Market Overview

05/21/2025

Industry Insights

Sacramento’s commercial real estate market is demonstrating a unique blend of stability and growth as we move through 2025. The California capital – long anchored by government jobs – is benefiting from steady economic drivers and an influx of investors priced out of coastal markets. In this overview, we examine the region’s key property sectors (office, industrial, retail, and multifamily), explore economic and demographic tailwinds, highlight important submarkets and developments, and compare Sacramento’s performance with other major California markets. The analysis is presented in an authoritative tone, reflecting seasoned insight into capital markets and regional dynamics, and is geared toward high-net-worth and institutional investors, developers, and experienced brokers.

Economic & Demographic Drivers

Several fundamental factors underpin Sacramento’s real estate fundamentals. The metro area’s population has expanded significantly in recent years, fueled by both natural growth and migration from pricier areas like the Bay Area. In fact, migration between San Francisco and Sacramento spiked by 70% in 2020, and the region’s population is projected to grow another ~4% over the next five years largely due to this influx SFGate. Affordability is a key draw: housing costs in Sacramento remain dramatically lower than in San Francisco, offering transplants and businesses far more space per dollar. Remote work trends have also played a role, enabling Bay Area professionals to relocate to Sacramento’s more cost-effective market while retaining high-paying jobs elsewhere.

On the economic front, Sacramento benefits from a diversified base. State government remains the largest employer, providing stability (especially in Downtown and Midtown Sacramento), while sectors like healthcare, education, and technology have expanded. In 2024, local job growth was around 1%, down from 2.6% the previous year, with healthcare accounting for the vast majority of new jobs as other sectors saw slight declines. Unemployment has ticked up to the mid-4% range, reflecting broader economic headwinds, but remains relatively low. This mix of public-sector ballast and private-sector growth (e.g. emerging ag-tech and life sciences firms) positions Sacramento as a steady performer. The presence of universities (UC Davis and Sacramento State), a burgeoning life science research hub, and ongoing infrastructure investments all contribute to a positive long-term outlook for demand across property types.

Policy is another tailwind. In early 2024, the City of Sacramento adopted a forward-looking 2040 General Plan that encourages higher-density infill development and more housing construction in transit-served areas. Notably, Sacramento became the first major city to eliminate single-family zoning constraints – removing caps on the number of residential units per lot and abolishing minimum parking requirements – to spur the creation of duplexes, fourplexes and other “missing middle” housing in existing neighborhoods City of Sacramento. This pro-development stance, coupled with state incentives, is expected to bolster multifamily and mixed-use projects in the coming years, supporting commercial growth in revitalized corridors.

Office Market Overview

How is Sacramento’s office sector performing in 2025?

Sacramento’s office market is in a period of transition. According to a recent Colliers report, regional office vacancy ended 2024 at approximately 21.5% – near record highs – after a wave of state government consolidations and private-sector downsizing during the pandemic years. Downtown’s high-rises, in particular, have grappled with elevated vacancy as agencies relocated to owned facilities and many companies embraced hybrid work models. However, leasing activity has been gradually recovering: Colliers noted that office leasing volume in 2024 was up about 5.9% year-over-year, and net absorption turned positive, improving by roughly 25% compared to the prior year. This suggests that while large blocks of legacy space remain empty, smaller tenants are beginning to backfill space and demand for quality, well-located offices persists.

Market sentiment for 2025 is one of cautious optimism. Landlords are adjusting to new realities by repurposing or upgrading properties to appeal to modern tenants (with an emphasis on collaborative layouts, wellness amenities, and flexible lease terms). Suburban submarkets are faring relatively better than the downtown core: areas like Roseville/Rocklin and the Highway 50 Corridor (Rancho Cordova/Folsom) have attracted tenants seeking lower costs, ample parking, and proximity to where their employees live. By contrast, some older buildings in North Natomas and downtown have seen long-term vacancies as the State retrenched and large private offices downsized. Even so, as of early 2025, there are signs of stabilization – Colliers projects availability will level off and tenant confidence should slowly improve going forward.

It’s also worth noting that Sacramento’s office rents and values remain attractive relative to coastal California. Class A office lease rates in Sacramento are roughly in the low-$2 per square foot range monthly (around the mid-$20s per sqft annually), a fraction of San Francisco’s premier office rents. This affordability, combined with the region’s growing talent pool, has led some companies to consider Sacramento as an expansion market or a satellite office location. For investors, cap rates on Sacramento office assets have expanded with rising interest rates, often in the 7-8% range, which is significantly higher than the sub-5% yields common in San Francisco pre-pandemic. Indeed, we’ve seen opportunistic acquisitions occur: for example, a prominent downtown Sacramento tower traded in late 2024 at roughly a 40% discount to its 2019 pricing, signaling that value-add investors are circling distressed office assets. While challenges remain (e.g. high vacancy and the ongoing hybrid work shift), Sacramento’s office sector is positioned for a gradual recovery rather than the severe dislocation observed in tech-heavy markets. (For context, San Francisco’s office vacancy soared to about 32% by the end of 2023 amid the tech downturn Commercial Real Estate Direct, underscoring Sacramento’s relatively more contained situation.)

Industrial Market Overview

Is Sacramento’s industrial real estate still a growth engine?

Industrial property has been the standout performer in Sacramento’s commercial real estate over the past several years. The region’s strategic location at the crossroads of major highway corridors (Interstate 5 and I-80, with links to the Bay Area, Southern California, and Nevada) makes it a prime logistics hub. Big-name e-commerce and retail distribution players like Amazon, Walmart, and automotive suppliers have established large facilities in greater Sacramento to take advantage of relatively affordable land and labor, as well as to meet the needs of a growing inland California consumer base. This led to a development boom in 2020-2022, with millions of square feet of modern warehouse space delivered.

That supply surge temporarily pushed vacancy up slightly. By late 2024, Sacramento’s industrial vacancy had risen to about 6.5% as new buildings came online faster than tenants could absorb them Colliers. Notably, 2024 marked the first year since 2012 that the region saw an annual net occupancy loss in the industrial sector – a testament to how tight the market had been for a decade prior. Despite this brief equilibrium shift, demand drivers remain very strong. Colliers reported that industrial leasing activity actually rose over 6% year-on-year in 2024, indicating that tenants are actively backfilling space; indeed, many large users only paused expansion plans due to economic uncertainty and are now returning to the market. By the first quarter of 2025, conditions were already rebounding – CBRE data showed the Sacramento industrial market vacancy tightening back down to roughly 4.8%, with average asking rents of about $0.84 per sq. ft. per month triple-net (CBRE). These figures underscore that most new supply has been digesting quickly, and the market remains fundamentally undersupplied in light of sustained logistics demand.

The outlook for industrial real estate in Sacramento is positive yet measured. Developers have become more cautious, slowing the pace of new construction starts in 2023-24, which should help prevent oversupply. Meanwhile, tenant inquiries for big-box warehouses and last-mile distribution space continue, especially as companies optimize supply chains and diversify locations away from ultra-expensive coastal ports. Key industrial submarkets include North Natomas (near Sacramento International Airport), South Sacramento/Elk Grove, West Sacramento (with its deepwater port and rail infrastructure), and the outlying areas of Placer County and Yolo County (where land availability allows large logistics parks). Land prices and rents here are markedly lower than in the Bay Area’s East Bay or Los Angeles’ Inland Empire, giving Sacramento a competitive edge for firms needing large footprints. We expect modest rent growth and stable high occupancy in 2025, with the industrial sector remaining a favored asset class for investors. Institutional capital, such as REITs and private equity funds, has been active in acquiring Sacramento industrial assets, drawn by cap rates in the 5-6% range and the prospect of long-term appreciation as the region’s distribution importance grows.

Retail Market Overview

How resilient is Sacramento’s retail sector?

Sacramento’s retail real estate market has shown resilience despite the headwinds facing brick-and-mortar retail nationally. The region’s steady population growth and relatively limited new retail development have kept fundamentals on a solid footing. At the end of 2024, the overall retail vacancy rate in Sacramento was in the mid-single digits (around 7.7% per Colliers, essentially flat with the prior year Colliers). As of Q1 2025, CBRE reported retail vacancies of about 5.6%, indicating that any uptick in empty space has been modest CBRE. In practical terms, well-located shopping centers – especially those anchored by grocery stores, home improvement, or other essential retailers – continue to enjoy high occupancy and even rent growth. Sacramento did not experience the overbuilding of retail that some Sunbelt metros did, so the market isn’t plagued by a glut of obsolete retail centers.

Consumer spending in the Sacramento area has held up reasonably well, though inflation and interest rates have made shoppers more cost-conscious. Retail sales growth slowed in 2024 amid economic uncertainty, and some smaller retailers have been cautious on expansion. Investment activity in retail properties reflected this caution: only about $613 million in Sacramento retail properties traded in 2024, a noticeable drop from recent years Colliers, as investors waited for clearer signals on consumer trends. That said, we are seeing renewed interest in well-performing retail assets in 2025 now that price expectations between buyers and sellers have adjusted. Cap rates for Sacramento retail centers have moved into the 6-7% range, higher than the ultra-low levels seen when capital was cheap. For savvy investors, the retail sector’s steady occupancy and cash flows – especially in necessity-based retail – present an appealing risk-reward profile compared to coastal markets where retail is more volatile.

One trend worth noting is the adaptive reuse and experiential retail developments in urban Sacramento. In Midtown and Downtown, older storefronts and underutilized spaces are being transformed into restaurants, breweries, entertainment venues, and service-oriented retail that cater to the growing urban resident base and workforce. Projects around the Golden 1 Center (the downtown arena) have catalyzed new dining and retail concepts in the surrounding DoCo (Downtown Commons) area. Additionally, as the residential population grows in Sacramento’s core and first-ring suburbs, retailers are following rooftops. Expect retail demand to remain strongest in communities with significant housing growth like West Sacramento, Elk Grove, Roseville, and Folsom, as well as infill neighborhoods where younger demographics are seeking amenities. Overall, Sacramento’s retail market appears set for slow-but-steady performance, avoiding extreme booms or busts and instead delivering consistent returns for landlords.

Multifamily Market Overview

How strong is Sacramento’s multifamily sector?

The multifamily housing sector in Sacramento has been exceptionally robust and continues to offer attractive fundamentals. During 2024, the region saw record-high renter demand – nearly 5,000 net apartment units were absorbed over the year, one of the strongest performances on record Colliers. This surge in demand pushed the overall apartment occupancy rate to about 95.5%, the highest level in Sacramento since before the pandemic. Essentially, despite concerns about interest rates and a cooling economy, people kept renting in Sacramento at near-record levels. Part of this is due to Sacramento’s relative affordability: many renters priced out of Bay Area or Southern California markets find Sacramento a more attainable option, which bolsters local occupancy. Additionally, homeownership remains out of reach for some households after the run-up in mortgage rates, so rental demand has stayed elevated.

Rent growth in Sacramento’s multifamily sector has been positive but measured. Annual effective rent growth was approximately 1–2% in 2024 – a far cry from the double-digit rent surges seen in 2021, but notably resilient given broader economic moderation. Landlords have maintained pricing power in most submarkets; concessions have not been widespread, largely because vacancy is so low. The most sought-after submarkets for apartments have been those combining convenience and value: for instance, the Natomas area (close to downtown and the airport) and South Sacramento/Elk Grove (with newer workforce housing) have outperformed, as has the Roseville/Rocklin corridor (driven by strong job and population growth in Placer County). These areas saw some of the highest absorption and rent bumps. Downtown Sacramento’s multifamily scene is also strengthening as new mixed-use projects come online, attracting young professionals who want an urban lifestyle at lower cost than San Francisco or Oakland.

On the supply side, multifamily construction activity has decelerated, which is actually a healthy sign for investors. Deliveries of new units in 2024 were down roughly 40% from the prior year Colliers, as developers faced higher financing costs and some uncertainty. This pullback in building has prevented oversupply and allowed the market to absorb the earlier wave of new projects. Sacramento’s development pipeline is still active – there are notable projects underway, including affordable housing initiatives and transit-oriented developments encouraged by the City’s new pro-housing policies – but overall, construction is proceeding at a sustainable pace. For investors, the multifamily sector’s outlook remains bright. 2024’s apartment investment sales volume in Sacramento jumped over 50% from the previous year, exceeding $590 million Colliers, as confidence in the sector returned. Cap rates for multifamily have edged up into the 5% range (from the 4%s a couple years ago), reflecting the higher interest rate environment, but Sacramento apartment assets still often yield better returns than comparable properties in coastal metros. With strong occupancy, modest rent growth, and supportive demographics, multifamily in Sacramento is expected to remain a favored target for both local and national investors seeking stable income and long-term appreciation.

Key Submarkets and Development Highlights

Sacramento’s metro area spans diverse submarkets, each with its own character and role in the regional property landscape. Understanding the key submarket dynamics is crucial for investors and brokers looking to pinpoint opportunities:

Downtown & Midtown Sacramento (Central City): The urban core, home to the State Capitol, government offices, and the central business district. Downtown’s office core has faced challenges with high vacancies, but it remains the region’s premier office address for law firms, lobbying groups, and government agencies. Midtown, adjacent to downtown, is a vibrant mixed-use district popular for its restaurants, boutique offices, and multifamily developments. Notable projects include ongoing high-rise residential towers and the redevelopment of the Sacramento railyards area just north of downtown, which is one of the largest urban infill projects in the country (planned to include housing, offices, medical facilities, a possible future MLS stadium, and retail).
Roseville/Rocklin (Placer County): A fast-growing suburban area northeast of Sacramento, roughly 20 miles from downtown. Roseville and Rocklin have become significant office and retail hubs in their own right, attracting companies that prefer suburban campuses and offering extensive shopping (including the Westfield Galleria mall in Roseville). Strong population and income growth in this area drives demand for both commercial space and housing. The Roseville submarket famously recorded positive office absorption even during 2023’s turbulence, thanks to expansions by insurance, healthcare, and engineering firms. New developments here often feature modern open-floorplate offices and master-planned communities with integrated retail.
North Natomas & South Natomas: Located just north of downtown across the river, Natomas was a major growth zone in the early 2000s and continues to evolve. North Natomas hosts a mix of newer housing, retail centers, and some large office campuses (including former back-office operations for the State). It also benefits from proximity to Sacramento International Airport. South Natomas, closer to downtown, has a cluster of office parks that historically housed many state agencies and corporate offices. As some state offices vacated, Natomas has a significant amount of office space looking for new tenants or conversions, but its affordable rents and ample parking make it an attractive option for cost-conscious firms. On the industrial side, Metro Air Park by the airport is a key distribution node, with Amazon and others occupying large facilities.
West Sacramento: Directly across the Sacramento River from downtown (in Yolo County), West Sacramento is an industrial and distribution powerhouse for the region. It’s home to the Port of West Sacramento, numerous warehouses, and manufacturing facilities. In recent years West Sacramento has also cultivated a growing life science and innovation district – for example, the Bridge District/Brooklyn Basin area is being targeted for biotech-oriented projects. A notable development is the planned “Capitol Innovation District” near the port, a 60-acre project aimed at ag-tech and biotech companies, led by local developers in partnership with research institutions. West Sacramento has also added new multifamily housing and retail to support its workforce, transforming parts of this once purely industrial city into a more mixed-use environment.
Elk Grove & South Sacramento: Elk Grove, just south of the city, is Sacramento’s second-largest city and has seen rapid residential expansion in the last two decades. It has emerging office and industrial parks (including a new medical campus and auto industry facilities) and serves as a retail hub for south county. Farther south, the town of Wilton and the planned community of Laguna Ridge indicate the outward growth. South Sacramento (the southern portions of the City of Sacramento) includes older neighborhoods and a large medical cluster (UC Davis Medical Center is actually in the Oak Park area of central Sacramento, but its influence extends). Aggie Square, the new innovation campus adjacent to the UC Davis Med Center in Oak Park, is a major project under construction that will bring state-of-the-art research facilities, medical offices, and incubator space to the area, further blurring the line between healthcare and commercial real estate. This investment is expected to spin off new demand for nearby housing and ancillary retail/office space.
Highway 50 Corridor (Folsom/Rancho Cordova): Running east of downtown, Highway 50 connects a series of suburbs and employment centers. Rancho Cordova has long been an office/industrial submarket with a concentration of back-office operations, defense, and aerospace companies (and more recently some tech and healthcare support services). Folsom, a bit further east, is an affluent community known for Intel’s large campus and other tech companies; it also has a lively historic downtown and high-quality retail. These areas benefit from a skilled workforce and continue to see new development – for example, Folsom Ranch is a large mixed-use expansion bringing thousands of homes and commercial space to Folsom, which will drive future demand for offices and services.

Across these submarkets, Sacramento is witnessing a number of significant developments that signal confidence in long-term growth. In addition to the railyards project and Aggie Square, investors should note projects like the continued build-out of Downtown Commons (with new hotels and residential components complementing the arena), planned residential conversions of older office buildings in downtown (a trend to watch if office vacancies persist), and various logistics developments on Sacramento’s periphery. The common thread is that both public and private sectors are investing in Sacramento’s future – from transit improvements (like the light rail extensions) to new mixed-use neighborhoods – laying the groundwork for sustained real estate opportunities.

Comparisons with San Francisco and San Diego

How does Sacramento’s CRE market stack up against other California markets?

Investors often compare Sacramento’s performance and prospects with larger California markets such as San Francisco and San Diego. While all three regions participate in the broader state economy, there are notable differences in scale, risk profile, and sector dynamics:

Market Size & Economic Base: San Francisco (and the broader Bay Area) is a global gateway market dominated by tech and finance, with correspondingly higher volatility. San Diego has a diversified economy with strong biotech, military, and tourism components. Sacramento, by contrast, is a government and regional services hub. Its economy is more insulated from tech booms and busts, which means it didn’t spike as high in the 2010s tech surge, but it also hasn’t suffered as steep a decline. For example, as mentioned, San Francisco’s office vacancy shot above 30% in the wake of remote work trends, whereas Sacramento’s office vacancy, though elevated, has hovered in the 15–22% range in recent years (depending on measurement and submarket). San Diego’s office vacancy, meanwhile, has risen into the mid-teens after the pandemic, higher than its historical norm but still below Sacramento’s current level. This indicates that Sacramento’s office market has endured more strain than San Diego’s, but far less than San Francisco’s.

Costs and Yields: Sacramento offers a clear value proposition. Commercial rents and prices in Sacramento are substantially lower than those in coastal metros. For instance, prime office rents in San Francisco can be 2–3 times higher than Class A rents in Sacramento, and the cost to purchase a downtown high-rise in SF or SD is exponentially greater. This lower cost basis in Sacramento translates into higher cap rates for investors. A stabilized multifamily property in Sacramento might trade at a 5% cap rate, whereas a comparable asset in the Bay Area could be sub-4%. Similarly, office and retail cap rates in Sacramento are a few percentage points higher on average than in San Diego or the Bay Area. These higher yields come with a different risk profile – Sacramento properties may not appreciate as rapidly in hot markets, but they provide steady income and have lower barriers to entry. Many institutional investors view Sacramento as a secondary market that can offer diversification, balancing the lower yields of their core coastal holdings.

Sector Trends: In the industrial sector, all three regions have strong demand, but San Diego and the Bay Area face extreme land constraints, resulting in sub-4% industrial vacancy and soaring rents in certain pockets (e.g., the South Bay or central San Diego). Sacramento, while tight, still has developable land, which has kept industrial rents more moderate (roughly $0.80–$1.00 PSF monthly in Sacramento versus $1.25–$1.50+ in parts of the Bay Area or San Diego). This means Sacramento can continue to add supply and attract tenants that don’t need to be in a coastal port city. In retail, San Francisco’s urban retail has been hit hard by the slow office recovery and reduced tourism during the pandemic, whereas Sacramento’s retail is more locally oriented and supported by its growing residential base – making it comparatively resilient. San Diego’s retail is bolstered by higher incomes and tourism in areas like La Jolla and Downtown SD, but neighborhood centers in all markets are performing similarly well. For multifamily, all California markets have high occupancy, but rent levels differ vastly: an average two-bedroom apartment in Sacramento might rent for around $1,800, versus $2,500 in San Diego and well over $3,000 in San Francisco. These disparities point to Sacramento’s relative affordability – a factor that continues to drive migration and, by extension, apartment demand.

Growth Outlook: Both San Francisco and San Diego are more mature, supply-constrained markets. San Francisco faces an uphill battle to refill its downtown offices and is contending with policy debates over converting unused commercial space and revitalizing its urban core. San Diego is growing steadily, particularly in life sciences real estate, but also encounters land scarcity and expensive housing that could eventually temper growth. Sacramento, on the other hand, has room to grow – both literally (greenfield development on the suburban edges) and figuratively (increasing its share of knowledge-economy jobs and higher-value industries). Its housing-friendly policies and lower cost structure position it to capture spillover growth from the Bay Area. In essence, Sacramento may not replicate the explosive growth of a tech boomtown, but it offers a stable growth trajectory that is increasingly appealing for long-term investors. It stands somewhat in the middle ground between a primary market and a tertiary one: more dynamic than many smaller cities, but without the frenetic peaks and troughs of places like San Francisco.

Investment Trends & Capital Markets

What is the current investment climate in Sacramento’s CRE market?

Coming into 2025, Sacramento’s commercial real estate investment market has been gaining momentum. After a quiet first half of 2024 (when rising interest rates and bid-ask gaps slowed deal activity), transaction volumes picked up notably in late 2024 as price expectations adjusted. Colliers observed that overall CRE deal flow in Sacramento increased heading into 2025, and that the bid-ask spread – the gap between what sellers hope to get and what buyers are willing to pay – is narrowing Colliers. This reflects a market finding its equilibrium: sellers have become more realistic about pricing in a higher interest rate environment, and buyers, flush with dry powder, are stepping in to seize opportunities in a less frothy market.

Capital sources: The buyer pool in Sacramento spans local private investors, regional syndicates, and national institutions. Local Sacramento investors (including family offices and established developers) have intimate knowledge of submarkets and often snap up value-add opportunities, as seen with some distressed office sales recently. Meanwhile, institutional investors – such as pension fund advisors and REITs – have been selectively increasing their exposure to Sacramento, particularly in multifamily and industrial assets where fundamentals are strongest. These institutional players are attracted by Sacramento’s solid yields and the prospect of demand growth, and many view Sacramento as part of a broader Northern California strategy (sometimes in tandem with secondary markets like Oakland or the Central Valley). Out-of-state capital is also present, including 1031 exchange buyers from more expensive California locales who see Sacramento real estate as a relatively bargain play with upside.

Debt and equity conditions: Higher interest rates in 2023-2024 did temper aggressive leveraging, but lenders remain available for Sacramento deals, especially local banks and credit unions that know the market. Loan-to-value ratios have become a bit more conservative and underwriting is scrutinizing rent growth assumptions closely. However, compared to coastal markets, Sacramento’s income returns are higher, which can help deals pencil out even with debt costs up – essentially, the cash flow yields provide more cushion. Equity partners (whether JV equity or private equity funds) are actively seeking placements in Sacramento, often favoring development deals in high-growth suburbs or acquiring existing assets where they can add value through lease-up or renovation.

By sector, multifamily and industrial remain the darlings of investors. Multifamily transactions saw a resurgence as mentioned, and pricing in late 2024/early 2025 actually ticked up for quality assets – a sign of renewed confidence. Industrial assets, when they come to market, tend to receive strong interest and can trade at premium values given the scarcity of available product. Retail investment has been more subdued, focused mainly on necessity-based centers or well-located strip centers with stable tenant lineups. There’s opportunistic interest in underperforming retail (for potential repurposing or lease-up plays), but underwriting is careful due to the sector’s bifurcation between winners and losers. Office investment is the most challenging – many investors remain on the sidelines, except for those with a contrarian or long-term view looking for steep discounts. That said, Sacramento’s office distress is not as severe as in San Francisco, so the market could see some turnaround stories; any signs of leasing improvement in 2025 could quickly translate into increased office deal volume as prices will appear very attractive relative to replacement cost.

An important theme is the pursuit of yield and stability. High-net-worth investors and institutional funds alike are drawn to Sacramento’s ability to deliver steady cash flows. Where a Los Angeles or Bay Area asset might rely heavily on rapid appreciation (with sub-4% initial yields), a Sacramento asset might start at a 5-7% cash yield, making it easier to hold through cycles. This is particularly appealing in a climate of higher base interest rates, where investors are keen to find real estate deals that outpace debt costs and inflation. As a seasoned observer, I’d note that Sacramento’s capital market is maturing: we’re seeing increasingly sophisticated deal structures, larger portfolio acquisitions, and even interest from foreign investors (though modest so far) who view Sacramento as part of the broader California real estate story.

Looking ahead, if interest rates stabilize or decline, one could expect a further boost in investment activity in Sacramento. Lower financing costs would improve leveraged returns, and likely bring more bidders off the sidelines. Additionally, Sacramento’s improving fundamentals – such as the expectation of stabilized vacancies and continued population inflows – provide a compelling narrative to underpin asset values. We anticipate cap rates in 2025 to hold relatively steady, given balanced conditions, with perhaps slight compression in multifamily and industrial if competition for limited supply heats up. Overall, the investment climate is best described as cautiously bullish: the Sacramento market is past its cyclical bottom and is drawing increased attention for its mix of reliable performance and growth potential.

Long-Term Outlook and Opportunities

Sacramento’s commercial real estate outlook over the long term is one of sustainable growth and incremental strengthening. While it may never have the explosive dynamics of San Francisco or Los Angeles, Sacramento also avoids many of the pitfalls that come with those markets. Its advantages – affordability, quality of life, central location within California, and role as the state capital – are likely to continue attracting businesses and residents. The demographic trend of migration to more affordable interior markets is not abating; if anything, high housing costs in the Bay Area will keep funneling talent and families to Sacramento for years to come. This growing talent pool can, in turn, help Sacramento diversify further into sectors like tech startups, fintech, or creative industries, complementing its core of government and healthcare.

From a real estate development perspective, Sacramento still has ample opportunity for new projects, and the political will to encourage them. The city’s push for infill development will open up new sites for mixed-use projects in transit-rich areas, potentially transforming underutilized commercial corridors into vibrant residential and retail hubs. We may see outdated strip malls give way to mid-rise apartment complexes with ground-floor retail, or aging office parks redeveloped into modern business campuses with integrated live-work components. The region’s commitment to sustainability – including aiming for carbon neutrality by 2045 and investing in transit, as noted in the general plan – will likely spur demand for transit-oriented developments and energy-efficient buildings, creating niches for green investment strategies.

In terms of sector outlooks, each has its long-term opportunities in Sacramento. The office sector, after resetting to a new normal, could present upside if companies re-evaluate the cost-benefit of expensive coastal offices and decide to hub more operations in Sacramento (particularly as hybrid work evolves – Sacramento could serve as a regional meeting hub or “hub-and-spoke” node for Bay Area firms). The industrial sector should continue to thrive with e-commerce and logistics prominence; moreover, as supply chains regionalize, Sacramento’s location is ideal for serving Northern California and the Pacific Northwest within a one-day truck haul. There is also potential for specialized industrial growth, such as cold storage facilities or high-tech manufacturing tied to the agricultural sector, given Sacramento Valley’s agricultural economy (ag-tech innovation is a focus area, with projects aiming to capitalize on that synergy).

For retail, long-term success will favor experiential and service-oriented centers that internet shopping can’t easily replace. Sacramento’s family-friendly suburbs will sustain demand for retail ranging from entertainment venues to dining and personal services. We expect the retail footprint to evolve but not contract drastically – the area’s population growth supports new retail whenever housing expands. And in multifamily, Sacramento’s relatively lower rents (by California standards) ironically may shield it from the affordability crises seen elsewhere; the region can absorb rent increases gradually without spiking into unsustainable territory, keeping occupancy high. As long as the region adds jobs and residents, multifamily will remain a cornerstone of real estate investment here. Indeed, some investors view Sacramento multifamily as a defensive play with upside – stable in downturns, but with room for rent growth as the metro matures.

In conclusion, Sacramento’s commercial real estate market offers a compelling story of a capital city coming into its own. It is a market where an investor can find a modern warehouse leased to a national tenant, an apartment building in a growing neighborhood, or a downtown office tower at a basis unimaginable in San Francisco – and all of those investments can be underpinned by genuine economic and demographic support. As a Brevitas executive with experience in countless markets, I see Sacramento as a place where prudent investment can be rewarded with steady returns and where patience can yield substantial gains. It’s a region where one should not expect overnight transformation, but rather a positive trajectory driven by fundamentals. For brokers and investors attuned to the long game, Sacramento is increasingly difficult to ignore. The city’s nickname is the “City of Trees,” and much like the heritage oaks that line its streets, Sacramento’s growth is organic, deep-rooted, and poised to stand the test of time in California’s real estate landscape.