Sacramento Commercial Office Space for Rent

Q4 2025

Sacramento Commercial Real Estate Market Report

Focus: Q4 2025 Market Trends

Executive Summary

The Sacramento commercial real estate (CRE) market in late 2025 is demonstrating resilience and steady growth, bolstered by its role as a government hub and an affordable alternative to the Bay Area [6]. The Office sector faces headwinds with vacancy at a 10-year high, yet leasing activity is surprisingly active as tenants capitalize on favorable terms [3]. Industrial fundamentals are robust, with net absorption remaining positive and vacancy holding near 6% despite new supply [4, 5]. Retail is a standout performer, achieving its lowest vacancy rate in nearly two decades [7]. Multifamily is tightening as construction slows, supporting rent growth and high occupancy [1, 2].

TenantBase Proprietary Data [11] highlights the distribution of active tenant demand over the last 90 days (176 total deals):

  • Retail/Storefront dominated market activity with 67.05% of all searches [11].
  • Warehouse was the second most active sector at 24.43% [11].
  • Office accounted for 9.09% of total search volume [11].

Office Market

Market Overview Sacramento's office market is navigating a period of adjustment, with vacancy rates elevated but leasing activity showing signs of life, particularly for smaller, high-quality spaces.

  • Vacancy & Availability: The overall vacancy rate rose to 18.7% in Q3 2025, the highest level in a decade, driven by state government consolidations [3]. Availability remains high as tenants right-size their footprints [3].
  • Net Absorption: Net absorption was negative (154,383) SF in Q3, extending a trend of occupancy losses [3].
  • Rental Rates: Asking rents held steady at $1.75 per SF (Full Service Gross), with landlords offering generous concessions to secure tenants [3].
  • Market Drivers: Despite high vacancy, deal velocity remains active, with a significant portion of demand coming from smaller users seeking move-in-ready suites [11].

TenantBase Activity [11]

  • Demand Share: Office accounted for 9.09% of total search volume [11].
  • Lease Term Preference: Demand is heavily skewed toward short-term flexibility:
    • Less than one year: 57.14% of deals [11].
    • 2-3 Years: 35.71% of deals [11].
    • 1-2 Years: 7.14% of deals [11].
  • Size Requirements: Tenants seeking short-term leases have an average lower size requirement of 2,000 SF, reflecting a need for flexible, small-scale office solutions [11].

Industrial & Warehouse Market

Market Overview The Sacramento industrial market remains a bright spot, benefiting from its strategic location and lower costs relative to coastal markets.

  • Vacancy & Rent: Vacancy ticked up slightly to 6.1%, but remains healthy by historical standards [4, 5]. Asking rents have stabilized at $0.95 per SF (NNN) after a period of rapid growth [4].
  • Demand & Supply: Net absorption remained positive at 185,000 SF in Q3, driven by logistics and local distribution users [4].
  • Construction: The construction pipeline has moderated to 1.8 million SF, down from peak levels, which will help keep vacancy in check moving forward [5].
  • Leasing Highlights: Tenant demand is diverse, ranging from small bay users to larger distribution requirements [11].

TenantBase Activity [11]

  • Demand Share: Warehouse accounted for 24.43% of total search volume [11].
  • Lease Term Preference: Demand is spread across lease terms:
    • 1-2 Years: 41.67% of deals [11].
    • 3-5 Years: 33.33% of deals [11].
    • 5+ Years: 16.67% of deals [11].
  • Size Requirements: The average lower size requirement for warehouse space is 2,000 SF for 3-5 year terms, while larger requirements for Less than one year averaged 10,000 SF [11].

Retail Market

Market Overview Sacramento's retail sector is thriving, with limited new construction driving vacancy to historic lows and supporting rent growth.

  • Vacancy & Availability: The retail vacancy rate dropped to 4.5% in Q3 2025, the lowest level in nearly 20 years [7, 9]. Availability is extremely tight in prime submarkets [9].
  • Rental Rates: Asking rents increased 2.1% year-over-year to $1.85 per SF (NNN), reflecting strong landlord leverage [7].
  • Construction: New retail development is minimal, with only 200,000 SF under construction, further tightening the market [7].

TenantBase Activity [11]

  • Demand Share: Retail/Storefront activity dominated with 67.05% of all search volume [11].
  • Lease Term Preference: Retail tenants show a balanced appetite for terms:
    • 2-3 Years: 28.57% of deals [11].
    • 3-5 Years: 22.45% of deals [11].
    • 5+ Years: 22.45% of deals [11].
  • Top Locations: Tenant interest is highest in Sacramento (24 deals), Roseville/Rocklin (10 deals), and Elk Grove (9 deals) [11].

Multifamily Market

Market Overview The multifamily market is stabilizing as the supply wave crests, with occupancy remaining high and rent growth returning to normal patterns.

  • Vacancy & Occupancy: Vacancy held steady at 5.4% in Q3 2025, with occupancy rates consistently above 94% [1, 2].
  • Rents: Average asking rents rose 1.2% year-over-year to $1,925 per unit, driven by demand for affordable housing options [1, 2].
  • Construction: The construction pipeline has shrunk to 2,500 units, a significant decrease from previous years, which will support tighter conditions in 2026 [2].
  • Investment: Sales activity remains cautious, but pricing has stabilized, offering opportunities for investors seeking steady yields [2].

2026 Outlook

Looking ahead to 2026, the Sacramento market is positioned for steady performance and gradual growth.

  • Industrial Strength: With a moderating construction pipeline and steady demand, the industrial sector is expected to see continued rent growth and low vacancy [5].
  • Retail Resilience: The lack of new retail supply will keep vacancy low and rents rising, making existing centers highly valuable [7].
  • Office Stabilization: While challenges remain, the office market is expected to find a floor as tenants take advantage of favorable terms and right-size their space needs [3].

Sources

  1. Kidder Mathews: Sacramento Multifamily Market Report Q3 2025
  2. Northmarq: Sacramento Multifamily Market Report Q3 2025
  3. Cushman & Wakefield: Sacramento Office MarketBeat Q3 2025
  4. Cushman & Wakefield: Sacramento Industrial MarketBeat Q3 2025
  5. CBRE: Sacramento Industrial Figures Q3 2025
  6. Ken Li: Sacramento Real Estate Market Trends 2025
  7. Kidder Mathews: Sacramento Retail Market Report Q3 2025
  8. Colliers: Sacramento Office Market Report Q3 2025
  9. CBRE: Sacramento Retail Figures Q3 2025
  10. Newmark: Sacramento Office Market Overview Q3 2025
  11. TenantBase Proprietary Market Data (Sacramento - Last 90 Days)

Information in this report is aggregated from various third-party sources and synthesized using artificial intelligence and other research tools. While we believe these sources to be reliable, we cannot guarantee the absolute accuracy or completeness of the data. This report is intended for informational purposes to provide market insight and should be independently verified prior to any use in a real estate transaction or legal commitment.