Regardless of what Gov. Arnold Schwarzenegger does or says at the state capital, local citizens have plenty to discuss. Sacramento's stable economy and new development wave are fueling the multifamily market in California's capital. Businesses are relocating to the region, creating more than 12,000 jobs in 2005. The condo conversion trend is taking a foothold, providing much-needed housing options for residents. And with interest rates on the upswing and fewer renters able to afford the high price of homeownership, vacancies will continue shrinking and rental rates will rise.
While state government remains the biggest employer in Sacramento, major private technology employers such as Intel and Hewlett Packard and health care companies such as Vision Service Plan and others provide tremendous economic stability to the Northern California metro area. Last year, Sacramento's unemployment rate hit 4.4 percent in October 2005, well below the statewide figure of 5.2 percent unemployment at that time. As more businesses continue to relocate into Sacramento and the surrounding areas, that statistic is expected to decline even further, with positive impacts for the capital city's multifamily investment market during the next few years.
Like many markets nationwide, Sacramento and its submarkets are seeing condo conversion projects pop up in abundance as its population grows. More than 1,500 units are in various stages of conversion in Sacramento's Roseville, Rocklin, and Folsom submarkets. Despite national concerns about the condo market, such conversions make sense for Sacramento; these areas are situated close to major employers and highways and are considered highly desirable spots for residential housing.
Sacramento's central location makes it an ideal place for both business and recreation. It is situated within an hour's drive from Napa Valley, Calif., home to some of the world's premier wine producers, and Lake Tahoe, which offers scenic views of snowcapped mountains and a variety of outdoor activities on the California/Nevada border. Sacramento is also just an hour east of the bustling San Francisco Bay area.
Residents are moving into all parts of Sacramento from across the nation, with the majority migrating from San Francisco and Southern California. While some have gone downtown (where the population has increased 5 percent since 1990), more are moving to Sacramento's suburbs. In the same time, Folsom's population has grown by 94 percent, and El Dorado's has soared more than 139 percent. As more submarkets are affected by this influx, the eastern parts of the region will experience continued growth, expanding further inland with development.
These population surges have boosted development across all of Sacramento's submarkets, which include downtown/midtown, Carmichael, Fair Oaks, Arden Arcade, the Folsom/Highway 50 corridor, and Roseville/Granite Bay. In the downtown/midtown submarket, many low- to mid-rise communities are in various stages of development, most of which are mixed-use residential properties.
With such vibrant development activity, the city's skyline will change dramatically during next three to five years. Plaza Lofts, a seven-story mixed-use residential and retail projects under construction downtown, is being developed by CIM Group. The project will feature 225 residential units and 22,100 square feet of retail space upon its completion in April 2006.
But perhaps the most dramatic proposed project in Sacramento is the Towers on Capitol Mall, a 53-story project that will be the first (and tallest) mixed-use high-rise in the area. The project, which will supply 847 condos and 65,000 square feet of retail space, will be completed in 2008.