Sacramento Multifamily Rents Decrease at Fastest Pace Since 2010
Sacramento's multifamily sector has struggled to gain any momentum ? but the hope is that fundamentals will strengthen soon as supply slows.
Most notably, rents dipped 2.4 percent year-over-year in the fourth quarter, marking the largest decline seen since the first quarter of 2010, according to a market report from Colliers. Also, this marked the second straight quarter that the category contracted.
"Rent growth has essentially been nonexistent for the last three years while the market has welcomed 8,000 new units since Q1 2023," Colliers explained.
"Six of the last 12 quarters have recorded flat or negative year-over-year rent growth."
The demand trend has been arguably worse, with net absorption at negative 391 compared with positive 1,563 posted at the end of 2024. This came as a result of weaker demand for higher-priced units in both the Midtown and Downtown submarkets, said Colliers.
Additionally, occupancy declined by 30 basis points to 95.2 percent.
However, the results may not be as lackluster as they look. Colliers said that the supply isn't "overwhelming" multifamily in Sacramento; it's actually keeping "rents relatively stable." Deliveries in the fourth quarter slowed to 284 units compared with 752 seen at the end of 2024. Also, construction has slowed to 2,179 compared with 3,296 units.
Also, another positive is the investment activity, as sales volume more than doubled to $579 million. Units were priced at an average of $200,000 per unit, marking a 2.5-year high. Jackson Square Properties made the largest acquisition, with its $161.5 million buy of a 536-unit property. Jackson Square had another one in the top three, with its $54.60 million purchase of a 272-unit asset. Demmon Partners came in second place, paying $106 million for a 275-unit property.
Colliers is optimistic about recovery in Sacramento's multifamily sector. It predicts that demand will increase as it keeps pace with deliveries, which should keep occupancy in the 95 percent range, while rents will likely stay flat in 2026.
"If developers fail to start new projects soon, the market could see rent growth spike again by 2027 if sub-4% vacancy returns," the brokerage said.
Source: GlobeSt/ALM