JKG
Q1 MULTIFAMILY MARKET REPORT MARKET OVERVIEW The Sacramento multifamily vacancy rate remains tight at 4.5%, as tenant demand from neighboring markets persists. Increased levels of demand have also impacted the construction pipeline with 4,600 units underway. As development continues to remain robust, activity has largely been concentrated Downtown although well located suburban assets in desirable areas like Elk Grove, Folsom, Roseville and Rocklin have become the most favored properties. In addition, thanks to new jobs and strong net migration, rent growth has been a dominant theme
Gallelli Real Estate 3005 Douglas Blvd #200 Roseville, CA 95661 P 916 784 2700 www.GallelliRE.com
for many years. However, many investors continue to keep a close eye on interest rates as they are on the rise, already affecting pricing throughout the region. Increases can lead to erosion in investor purchasing power as well as individual’s ability to achieve home ownership, relegating some to the rental market as home prices continue to soar.
*Quarter Over Quarter Change
4.5% Vacancy Rate
$1,832
$2.16
Average Monthly Rent
Average Rent Per Square Foot
MARKET TRENDS Vacancy has ticked upward early in 2022, but by only 0.6% in the past year. The largely flat vacancy rate is up from an all-time low set in 2021 but remained very tight at 4.5%. Most of the recent increases in vacancy can be linked to supply driven pressure as deliveries have totaled 1,800 units over the past 12 months. Sacramento apartment rents continue to climb despite increases in new units being brought online. While construction numbers continue to drive upward, the number of units as a percentage of the overall market is still very low as compared to nearly all other markets. Population growth has been the largest demand driver of late. According to recently released Census data, Sacramento, Yolo, and Placer County have had population growth that has exceeded increases in housing inventory over the last 10 years. More recently, net migration from the Bay Area has been a major factor as individuals look to capitalize on their employer’s more lenient work from home policies and relocate to the region.
CONSTRUCTION Sacramento’s development pipeline has grown steadily over the past few years and is near the post-recession peak, with 4,600 units under construction. Development activity has been consistently accelerating since the start of the pandemic. The largest project in Downtown is the 487-unit Mirasol Village scheduled to complete in mid-2022. Developed by the Sacramento Housing & Redevelopment Agency, the new project will be primarily dedicated to affordable units, which has been vastly outpaced by market rate housing over the past few years.
INVESTMENT HIGHLIGHTS Given that sales typically start the new year slowly, the Sacramento multifamily investment market has gotten off to a solid start in 2022. First quarter sales volume reached $290 million, a significant uptick from the prior quarter with nearly double the volume. Meanwhile, the average cap rate remained low at 5.1%. As cap rate compression continues in the market in conjunction with rising construction costs, this has led many investors to seek out more stabilized properties that do not require renovations. With naturally rising rents, owners can achieve desired returns without the need for extensive and risky renovations. The largest sale of the year occurred in March, when The Core Natomas was purchased by The Shindler Group for $147 million ($490,833/unit), the first deal of 2022 in excess of $100 million. The 300-unit property was completed in December 2020 and was 76% leased at the time of sale. Downtown remained intriguing to investors, as well, and they have shown a willingness to pay a premium on a per-unit basis. Q Apartments, at 1430 Q St, for example, sold in March for $57 million, the property has 75 units and approximately 9,000 square feet of ground floor retail space. The building was 99% occupied at the time of sale to San Francisco, California based Soma Capital Partners.
3.7%
3.6%
Sacramento Unemployment
United States Unemployment
VACANCY RATE 6.00%
Vacancy Rate (%)
5.00% 4.00% 3.00% 2.00%
2022 Q1
2021 Q4
2021 Q3
2021 Q2
2021 Q1
2020 Q4
2020 Q3
2020 Q2
2020 Q1
2019 Q4
2019 Q3
0.00%
2019 Q2
1.00%
SALES VOLUME VS. PRICE PER UNIT $400,000,000
$450,000
$350,000,000
$400,000 $350,000 $300,000
$250,000,000
$250,000
$200,000,000
$200,000
$150,000,000
$150,000
$100,000,000
$100,000
$50,000,000
Sales Volume
Price/Unit
2022 Q1
2021 Q4
2021 Q3
2021 Q2
2021 Q1
2020 Q4
2020 Q3
2020 Q2
2020 Q1
2019 Q4
2019 Q3
2019 Q2
$0
$50,000 $0
Price/Unit
Sales Volume
$300,000,000
MULTIFAMILY Q12022 JKG
Multifamily Market Statistics
(Submarket criteria based on: 25+ Existing, Proposed, Under Construction, Final Planning Units, Market Rate & Market/Affordable)
COMPARISON TO LAST YEAR Q1-2022
Submarket
Q1-2021
Average Rent
Avg Rent PSF
Asking Rent % Growth/ Yr
Arden Arcade
$1,412
$1.82
9.5%
3.0%
$1,289
$1.66
2.7%
Carmichael/Citrus Heights
$1,617
$2.01
10.4%
2.9%
$1,464
$1.82
2.5%
Davis
$2,159
$2.34
5.0%
3.7%
$2,057
$2.23
10.6%
Downtown Sacramento
$2,033
$2.72
5.4%
9.4%
$1,929
$2.58
9.9%
El Dorado Hills
$2,159
$2.27
9.1%
3.3%
$1,979
$2.09
1.9%
Elk Grove
$2,080
$2.11
6.7%
3.8%
$1,949
$1.97
2.4%
Folsom/Orangevale/Fair Oaks
$2,106
$2.33
9.0%
5.3%
$1,932
$2.14
4.4%
N Sacramento/N Natomas/N Highlands
$1,850
$2.14
11.4%
5.5%
$1,661
$1.92
4.6%
Rancho Cordova
$1,669
$2.04
11.3%
2.9%
$1,500
$1.84
2.0%
Roseville/Rocklin
$2,302
$2.44
11.9%
5.5%
$2,058
$2.18
3.0%
South Sacramento
$1,662
$2.02
11.5%
4.7%
$1,490
$1.81
2.7%
West Sacramento
$1,628
$2.05
6.1%
3.8%
$1,628
$2.05
3.5%
Totals
$1,832
$2.16
9.9%
4.5%
$1,667
$1.96
3.9%
Vacancy
Average Rent
Avg Rent PSF
Vacancy
About Gallelli Real Estate Gallelli Real Estate is a private firm that specializes in commercial real estate services and property management. We believe that as a boutique firm whose understanding of the business runs as deep as our core values, our advantage is large. We take pride in our unique approach to offer more individual solutions that address the ever changing needs of our clients and the industry. After all, our success is measured by the success of our clients and the strength and longevity of our relationships. For the latest news from Gallelli Real Estate, visit GallelliRE.com, or follow us on Twitter: @Gallelli_RE and LinkedIn.
Gary Gallelli President 916 784 2700 gary@GallelliRE.com
Gallelli Real Estate 3005 Douglas Blvd #200 Roseville, CA 95661 P 916 784 2700