Industrial Real Estate in Sacramento, CA

Cap rates for industrial properties in Sacramento vary by submarket, property class, and occupancy levels. The overall Sacramento market average cap rate is approximately 6.0%. Class A properties typically trade at lower cap rates than value-add opportunities.

Industrial has benefited from structural demand drivers including e-commerce growth (which requires 3x more logistics space than brick-and-mortar retail), supply chain reshoring and nearshoring trends, inventory stockpiling following pandemic-era disruptions, and limited developable land in infill locations. These factors have driven vacancy rates below 4% nationally and pushed rent growth well above historical averages in most markets.

Bulk warehouses are large-scale distribution centers (typically 200,000+ SF) located along major transportation corridors, used for regional storage and distribution. Last-mile facilities are smaller (20,000-150,000 SF), located closer to dense population centers, and serve the final leg of delivery to end consumers. Last-mile properties typically command higher rents per square foot due to land scarcity and proximity to customers but offer lower overall NOI given their smaller footprint.

Bay Area residents and businesses relocating to Sacramento for affordability have been a primary growth driver. Remote workers earning Bay Area salaries while living in Sacramento support premium apartment rents. Companies establishing Sacramento offices for employees who relocated create office demand. This trend has compressed cap rates in Sacramento toward levels more typical of coastal markets, though a meaningful spread still exists.

Sacramento industrial has been a standout performer, with vacancy rates dropping below 4% as e-commerce and food distribution companies seek Northern California locations. The metro's lower land and labor costs compared to the Bay Area, combined with interstate highway access and proximity to a major consumer market, support continued demand. New supply in West Sacramento and the Metro Air Park area is being well absorbed.