Industrial Market
The Inland Empire industrial market improved in the third quarter with 7.4 million square feet of activity.
The West submarket saw the majority of activity with 5.1 million square feet of the quarter’s total. Leasing made up 6.1 million square feet of the market total, while sales accounted for 1.2 million square feet.
The third quarter brought the market to 22.3 million square feet of activity since the start of the year, exceeding 2008’s 19.8 million square feet and up 5% from the first nine months of 2009.
Overall net absorption totaled 1.6 million square feet this quarter, contributing to a year-to-date total of 7.5 million square feet. That surpassed the 2009 total of 6.3 million square feet.
Lease rates and sale prices have strengthened in the West Inland Empire and have stabilized in the East. A lack of construction is constraining supply, pushing up lease rates.
Office Market
The Inland Empire office market, which was hit hard by the recession, now is positioned to begin what is expected to be a slow, steady recovery.
Once known as the fastest-growing metropolitan area by population and construction, the financial downturn forced many companies to consolidate or close Inland Empire offices, many of which were secondary Southern California locations. That resulted in record-high unemployment in the area.
As we enter the final quarter of the year, there is renewed optimism in the market and hope for a stronger 2011.
The overall Inland Empire vacancy rate saw a nominal decrease in the third quarter to 23.4%, a reduction of slightly more than 1% from the second quarter. The amount of available space, which includes directly occupied and sublease space, declined slightly and now stands at 28.5%.
The third quarter saw improved net absorption, posting a positive 81,958 square feet. The West submarket drove the gain, accounting for more than 95,000 square feet of positive net absorption. The East submarket saw about 13,000 square feet of negative net absorption.
The Inland Empire’s low rents continue to provide the market with a competitive advantage over neighboring counties. At $1.79 per square foot a month, the overall office average asking lease rate shed a penny from the second quarter.
Construction of office space remains minimal. There currently are two properties in the construction phase totaling 212,836 square feet. Both are due in 2011.
Analysis provided by CB Richard Ellis Group’s Global Research and Consulting.
The Real Estate Watch Chart
Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
