Rent Growth Continues in Sacramento
California’s capital city again led the nation in multifamily rent growth in 2017. This year, a surge of 1,100 new apartments is poised to push rates up by a more moderate 7.2 percent.
Sacramento rent evolution, click to enlarge
Sacramento’s reign as the top market for multifamily rent growth continued in 2017, and it is poised to do the same in 2018, at a time when most markets will look to find their footing. With completions set to hit a new cycle peak nationally, a slight uptick is in the cards for Sacramento, although demand is likely to keep outpacing supply.
Ongoing economic improvement is being fueled by development projects in the market’s core. Leisure and hospitality expanded rapidly in 2017, with construction of a number of facilities throughout the market, driving the need for labor. With Bay Area residents increasingly flocking to lower-cost Sacramento, developers have set up extensive projects throughout the metro, including 4 million square feet of office assets in the planning and permitting stages. The continued need for space has generated a large pipeline of projects at the Railyards and Downtown Commons, as Sacramento finds its stride.
Sacramento’s multifamily pipeline has filled out, with 2,680 units under construction as of January, while another 14,100 units are in the planning and permitting stages. With a projected 1,100 units coming to the market in 2018, which would mark a cycle high, rent growth is bound to shift down to around 7.2 percent by year-end.
