Retail Report: Capital City Coming Around

SACRAMENTO, CA-Improved absorption is expected to lower retail vacancy and raise rents here in 2004, according to the latest retail research report on the region by Marcus & Millichap.

The brokerage firm is predicting that overall retail vacancy in Sacramento will drop by 40 basis points during the year, from 7.7% at the end of 2003 to 7.3% by the end of 2004. Vacancy in the Downtown/South Sacramento submarket rose to 7.1% in 2003 due to new construction and government job cuts, but is expected to drop back to 5.8% in 2004 due to stable retail demand and decreased construction, according to the report. Concurrent with the overall decrease in rents, the average asking rent in Sacramento is forecast to rise to $20.43 per sf during 2004, up from $19.74 at the end of 2003.

Approximately 1.4 million sf of retail space is expected to come on line in 2004, a 30% decrease from 2003, when 2 million sf came on line. Most of last year’s completions occurred in the Rancho Cordova/Highway 50/Folsom sub market, but activity will decrease there this year, according to the report. The new favorite for 2004 will be the Citrus Heights/Orangevale/Natomas sub market, which is expected to see 1 million sf of completed by the end of 2004. In the Downtown/South Sacramento sub market, developers are expected to deliver 150,000 sf, largely to serve new housing that is under construction.