Record-High Office Vacancy In North California
Record-high office vacancy rates coupled with growing housing demand in Northern California are pushing developers to transform unused work environments into living spaces. CBRE Group recently reported offices in cities like Sacramento are continuing to face an uncertain future in the wake of the COVID-19 pandemic. "In Sacramento, a market not heavily reliant on public transit nor heavily populated by the technology sector, vacancy increase occurred rather evenly between suburban and urban submarkets," CBRE Senior Vice President Tony Whittaker told. "Approximately 28% of Sacramento’s office workforce is comprised of public sector employees, and many agencies are still working from home." This month, Sacramento County officials have received two applications to convert existing office buildings into housing. Proposed projects include: "There is too much office product, and some of the [assets] are cost-prohibitive to bring back to life as office buildings given projected office lease rates and the unpredictable demand," Whittaker said. "A logical solution is to repurpose as residential as we know that demand is high." Even developers applied last year to build a brand new 125-unit apartment complex in South Sacramento on 8740 Bruceville Road originally planned for office buildings. But developing office space into housing in Sacramento hasn't been universally popular. According to real estate site RentCafe, the number of old office spaces scheduled for conversion into apartments nationwide went from 12,100 to 55,300 between 2021 and 2024. Recent scheduled conversions in the city of Sacramento include three state buildings along Capitol Mall that Gov. Gavin Newsom announced last year will result in 400 to 800 housing units. The buildings include:Office-to-housing conversions are a statewide trend that Modesto real estate agent Marvin Wells says will continue as office vacancy rates rise. "Even real estate agents are working from home. There was concern the commercial real estate market would crash because most of these [office] buildings were built before COVID-19."
Tags : CBRE Group real estate RentCafe Sacramento County COVID-19 pandemic technology sector