Sacramento is experiencing the strongest rental market it has seen in years!

By Dan Hines & Scott Raymond

 It is definitely a good time to be a landlord investor in Sacramento, not so much if you are a tenant.   According to Axiometrics, a leading real estate research firm, Sacramento is in the top five nationally in some very respectful statistics including year over year percentage rent growth, lowest vacancy rates, highest tenant demand and lowest new construction of units coming on line.   In fact, Axiometrics reports that Sacramento has now realized eight consecutive months as the market with the highest rent growth in the nation.

 The Downtown / Midtown market in particular is the hottest of all submarkets in Sacramento boasting an average vacancy rate of 4.1% and average Asking Rent for Class A properties of $2,245.   With very little new construction, some of the brand new marquis projects such as 16 Powerhouse, Legado De Ravel and Eviva have experienced overwhelming demand and record rents.   16 Powerhouse, as an example, reached 100% occupancy within just a few months of opening and has average rents of over $3,000 and $2.89 psf.

 It’s not just the brand new projects that are benefiting either   Many older properties throughout Downtown / Midtown which have undergone substantial remodels are being rewarded by tenants with record level rents never seen before for older projects.   Properties such as The Q and The Elan are two such properties.   Both properties, managed by Raymond Management, originally built in the 60's and 70's had over $1M spent on them and underwent a significant transformation.   Rents went from $700 to $800 per month on average for one bedroom units to between $1,400 to $1,600.  

 At this time, the market shows no sign of letting up.  There is just too much demand for too little supply.  You can credit much of this to the explosive job growth in the health care industry, government and the education sectors.   In fact, at Raymond Management we estimate that at least 40% of our new tenants are transferring in from out of the area to take jobs within our market.  REIS, another research firm, predicts this tenant demand and to continue putting upward pressure on rents through 2020.   Sacramento, it seems, is finally turning the corner and becoming a very desirable region for employment and lifestyle, and consequently, a legitimate market for real estate investors for the foreseeable future.


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