Offices in Burlingame, Capitola, Monterey, Oakland, Palo Alto, Pleasanton, Sacramento, Salinas, San Francisco, San Jose, San Rafael, Santa Rosa, Walnut Creek Broker Lic #00825241 www.ctbt.com City, State Year Industrial Report Sacramento Valley Third Quarter 2011
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Industrial Report 3Q Cassidy Turley...420 N. Pioneer Ave., 19,202 Frontier Ag Company Lease Davis/Woodland Industrial Submarkets Sacramento Valley Konrad Knutsen Director of Research
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Offi ces in Burlingame, Capitola, Monterey, Oakland,
Palo Alto, Pleasanton, Sacramento, Salinas, San Francisco,
San Jose, San Rafael, Santa Rosa, Walnut Creek
Broker Lic #00825241 www.ctbt.com
City, State Year
IndustrialReport
Sacramento ValleyThird Quarter 2011
SACRAMENTO VALLEY INDUSTRIAL
-2,000
-1,000
0
1,000
2,000
3,000
2006 2007 2008 2009 2010 2011
Squ
are
Feet
(000
s)
9%
10%
11%
12%
13%
14%
2006 2007 2008 2009 2010 2011
Net Absorption
Vacancy
4-Year Average
Vacancy12.6%
Net Absorption538,662 SF
Deliveries0 SF
Asking Rent$0.35 NNN
Market Tracker*Arrows = Current Qtr Trend
Industrial Market SnapshotSacramento Valley • Third Quarter 2011
www.cassidyturley.com
Economic Indicators
Q3 11 Q3 10
Sacramento Valley Employment
1.032M 1.048M
Sacramento Valley Unemployment
11.89% 12.47%
U.S. Unemployment 9.1% 9.6%
U.S. CCI 49.93 50.94
*Includes El Dorado, Placer, Sacramento & Yolo Counties
Market Records Second Consecutive Quarter of Growth Despite Doldrums
As of the close of the third quarter, industrial vacancy within the Sacramento industrial market stood at 12.6%, down from the 13.0% mark recorded just three months ago. This is the second consecutive quarter in which the market has posted declines in vacancy—the last time that this happened was in 2007. This is despite the fact that the Sacramento economy remains challenged by an 11.9% unemployment rate and the fact that the national economy has been mired in a crisis of confidence since August. In many of Northern California’s industrial markets, space users have reacted to the heightened sense of economic uncertainty by scaling back, postponing or even cancelling growth plans. But while many of the Bay Area’s markets went backwards this quarter, Sacramento turned in a strong quarter thanks to growth from energy (primarily solar) and food users seeking the region’s cheaper rents. All told, the market absorbed 539,000 square feet of space this quarter—it’s strongest performance since the fourth quarter of 2007. Year-to-date the market has recorded over 603,000 square feet of occupancy growth.
The West Sacramento submarket led all other trade areas in terms of occupancy growth this quarter, recording 234,000 square feet of growth with vacancy decreasing from 7.9% to 6.5%. The average asking rent here has remained stable near the $0.36 per square foot mark (on a monthly triple net basis) for most of the past year. The Power Inn submarket followed, with 175,000 square feet of positive net absorption, dropping vacancy from 10.9% to 10.2%. Rents here have also remained stable at roughly $0.34 per square foot over the past year. The Sunrise submarket recorded 112,000 square feet of occupancy growth , driving vacancy downward from 13.4% to 12.1%. The average asking rent here stands at $0.40 per square foot, down from $0.45 one year ago.
Of Sacramento’s 16 major trade areas, only five submarkets recorded occupancy losses during the third quarter. The Natomas/Northgate market led all others with 137,000 square feet of negative net absorption in the third quarter. Vacancy here crept up from 14.1% to 15.2% though asking rents have remained relatively stable at $0.34 per square foot for the past four quarters. The Downtown submarket followed, posting negligible occupancy losses of 27,000 square feet over the past quarter. Vacancy here now stands at 6.2% while the typical asking rent remains in the low $0.40 range.
Sacramento continues to face multiple economic challenges. The local market for bulk distribution space, however, has remained strong thanks to both the region’s comparatively low price points and the continued growth of food distribution users. The market for service-related industrial, manufacturing space and smaller multi-tenant space continues to face weak demand levels. The real question going forward is whether or not the ongoing crisis of confidence morphs into something much more malignant. Most economists still put the chances of a double-dip recession at between 33% and 40%. Double-dip is unlikely. But a near-flat economy is almost guaranteed over the final quarter of this year.
For Sacramento we will likely continue to see positive momentum from distribution users, but other space user types may increasingly hold off on making any moves until there is greater clarity in the marketplace. From those users, we expect to see consolidations outpacing growth requirements over the next few months. However, we are aware of enough larger distribution deals in the pipeline that absorption over the final quarter of the year should remain in positive territory. Vacancy levels will either stay where they are r post slight declines in the fourth quarter. Rents have largely stabilized and arguably have very little room left to shrink. Still, we are likely at least a couple of years away from any sort of significant widespread rental rate growth.
Cassidy Turley Industrial Market SnapshotSacramento Valley • Third Quarter 2011
Key Lease Transactions Q3 11
PROPERTY SF TENANT TRANSACTION TYPE SUBMARKET
2900 Spruce St., McClellan 112,700 N Solar Lease McClellan
1740 W Enterprise Blvd., 100,850 Nor-Cal Beverage Lease West Sacramento
1429 E Beamer St, Woodland 82,431 N/A Lease Davis/Woodland
1420 Enterprise Blvd, 53,982 Farmer’s Rice Coop Lease West Sacramento
3899 Security Park Dr, 35,210 Pisor Industries Lease Sunrise
4201 Sierra Point Dr, Sac. 31,558 Stay Safe Shred Lease Natomas/Northgate
420 N. Pioneer Ave., 19,202 Frontier Ag Company Lease Davis/Woodland
Industrial SubmarketsSacramento Valley
www.cassidyturley.com
Konrad KnutsenDirector of Research
555 12th StreetSuite 1400Oakland, CA 94607Tel: 510.465.8000Fax: 510 .465.1350
The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.
Sacramento Valley Industrial ReportThird Quarter 2011
www.ctbt.com
Disclaimer: The information contained herein while not guaranteed has been secured by sources we deem reliable. All information should be verifi ed prior to lease or sale.
Industrial Market Report
Sacramento Valley
Defi nitions
Manufacturing ProductBuildings typically used for industrial purposes
(Less than (3/1000 parking, clear height less than
18’, three sides of concrete and one side of glass,
usually 6%–15% offi ce build out).
Warehouse ProductBuildings typically used for bulk warehouse
purposes (2/1000 parking or less, clear height
minimum of 18’, limited glass, dock and/or grade
doors, and minimal build-out).
Total Building BaseTotal warehouse buildings over 10,000 square feet
in size.
Direct AvailabilitiesTotal square footage being marketed for lease by
landlord available within 90 days. This may include
availabilities with pending leases.
Sublease Availabilities Total square footage being marketed for lease by
sublessor.
VacancyTotal available square footage (direct & sublease)
divided by Total Building Base.
Net AbsorptionChange in occupied building square footage in a
given time period.
Avg. Asking RateWeighted Average NNN Rate (by available square
footage) of available spaces with Gross rates
converted to NNN rates.
Historical ContinuityCassidy Turley BT Commercial maintains a building
by building historical record. Comparing previous
reports to this report may show different building
size numbers and statistics. Changes are caused
by reclassifi cation of buildings and revised building
sizes. Historical comparisons should be made from
this report only as Cassidy Turley BT adjusts the
historical record accordingly.
SourceData is tracked and tallied from information
provided by The Costar Group.
Report Published By:
Cassidy Turley BT CommercialSacramento520 Capitol Mall Suite 500