After a wave of new deliveries across Northern California, the multifamily housing market is showing early signs of stabilization. Regional markets such as Sacramento, Chico, and Redding are adjusting to a post-surge environment, marked by cooling construction activity, moderate rent growth, and stable-to-improving vacancy rates. While each city presents its own dynamics, the broader trend is clear: the Northern California multifamily market is entering a phase of recalibration.
Sacramento: Vacancy Still Elevated, But Supply is Tapering
The Sacramento multifamily market has been contending with the aftereffects of a significant supply influx. Nearly 7,500 market-rate units came online in 2023 and 2024, pushing vacancy rates up to 6.5%, above the region’s historical average of 5.7%. However, the pipeline is slowing: only 1,400 units are currently under construction, representing just 0.9% of existing inventory. This reduction in new deliveries should allow the market to absorb recent completions more effectively.
Rent growth in Sacramento has been muted, with a year-over-year change of just 0.1%. Downtown Sacramento, the epicenter of recent development, continues to feel pricing pressure, although suburban submarkets such as North Sacramento and Natomas are seeing more activity. The prevalence of concessions to attract and retain tenants—with some properties offering up to eight weeks of free rent—is likely to persist through the near term.
Chico: Limited New Supply Maintains Low Vacancy
Unlike Sacramento, Chico has seen no new market-rate multifamily developments break ground since late 2022. The lack of new construction, paired with stable demand from the local student population at California State University, Chico, has kept the vacancy rate low at 4.7%.
Rents in Chico have grown modestly at 1.4% year-over-year. The market’s affordability compared to the statewide average—rents in Chico average around $1,410 per month—makes it attractive to renters, but low rents also discourage new market-rate development. Recent multifamily investment activity remains concentrated among small private investors, drawn to the area’s consistent occupancy and slow but steady rent growth.
Redding: Low Inventory and Vacancy Define the Market
Redding remains the smallest of the three regional markets in terms of multifamily inventory, with approximately 5,700 units. Vacancy stands at 3.5%, just slightly above its long-term average. The market has seen no new deliveries or construction starts over the past year, which has contributed to its low vacancy.
Year-over-year rent growth in Redding reached 2.0%, outpacing both Sacramento and Chico. The average monthly rent in Redding is approximately $1,220, making it one of the more affordable options in Northern California. With a limited pipeline and strong rent fundamentals, Redding remains a stable market that may attract investors seeking reliable returns.
Step-by-Step: How To Evaluate Investment Opportunities in the Northern California Multifamily Market
- Assess Local Supply Pipelines: Review current and upcoming multifamily construction activity. Markets with declining pipelines (like Sacramento) may present lease-up opportunities.
- Analyze Vacancy and Absorption Trends: Evaluate how vacancy rates compare to historical averages. Markets like Redding with consistently low vacancy suggest strong underlying demand.
- Compare Rent Growth and Concessions: Look for regions where rent growth outpaces concessions. Redding currently shows stronger fundamentals than markets with heavier concessions like Sacramento.
- Understand Tenant Drivers: In Chico, student housing demand is a key factor. In Sacramento, urban migration patterns and job growth are more influential.
- Identify Buyer Competition and Cap Rates: Sacramento has seen increased institutional interest, while Chico and Redding remain dominated by small private investors.
Why the Northern California Multifamily Market Is Entering a New Phase
The Northern California multifamily market is transitioning out of a high-supply cycle into one of stabilization and recalibration. Sacramento, which bore the brunt of the supply surge, is already seeing a cooldown in new starts and a shift in development activity to suburban submarkets. Chico remains fundamentally constrained on the supply side, while Redding continues to post low vacancy and healthy rent growth without any new construction.
This shift reflects broader macroeconomic trends including cautious lending environments, elevated construction costs, and changing renter demographics. As such, developers, owners, and investors should adjust strategies accordingly, focusing on stabilization, operational efficiency, and long-term positioning.
Summary
The Northern California multifamily market is stabilizing after a multi-year surge in development. Sacramento’s vacancy rate is elevated but showing signs of relief as construction slows. Chico’s steady performance is supported by limited new supply and student-driven demand, while Redding demonstrates strong rent fundamentals with little development risk. Across the region, now is a strategic time for investors and developers to reassess opportunities with a focus on long-term market health.
Strategic Multifamily Opportunities in Northern California
Stay up to date on multifamily real estate trends with our market reports. To explore multifamily investment or development opportunities across Northern California—including Sacramento, Chico, and Redding—reach out to Capital Rivers Commercial. Our team provides strategic insight, local expertise, and personalized service. Contact us today or browse our latest listings to see how we can help you achieve your investment goals.
