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REAL ESTATE WATCH: Inland Empire

Industrial Market

The Inland Empire’s transportation network has made it a distribution hub. Inexpensive land prices coupled with connectivity to the ports of Los Angeles and Long Beach have attracted a vast array of businesses to the area.

The Inland Empire industrial market continues to see lease rates and sale prices decline, so tenants are taking advantage of low rents and choosing to lease more efficient buildings.

Leading economic indicators point to an economic recovery, although it will be a long road.

The third quarter ended with an overall absorption of more than 2.4 million square feet. This solidified a 172,816-square-foot increase from the second quarter. This can be credited to aggressive landlords making deals.

The Inland Empire west submarket continues to lead with the majority of activity, closing out the third quarter with 4.9 million square feet of activity, while the east submarket closed the quarter with 1.5 million square feet of activity.

The second quarter’s availability rate of 15.4% increased to 15.8% or slightly more than 1.5 million square feet of new available space.

Conversely, the vacancy rate decreased from 9.3% to 8.7% in the third quarter.

Office Market

The Inland Empire office market has begun to show some hopeful signs of a stabilizing market.

The overall Inland Empire vacancy rate has remained relatively steady at 24.7% in the third quarter, a slight increase from second quarters’ 24.6%.

During the third quarter, the market also saw absorption of 45,749 square feet, marking the first time this year that the Inland Empire office market has recorded positive absorption.

Both sale and lease activity in the region have improved in the second half of 2009. The most notable sale transaction was a 65,281-square-foot sale in Ontario to Victorville-based hospital operator Prime Healthcare Services.

Leasing has continued to thrive in the third quarter as many large lease transactions were inked. Among the largest leases were the 22,186-square-foot ADP Inc. renewal in Rancho Cucamonga, the 21,000-square-foot Paychex Inc. relocation in the Hunter Park submarket of Riverside, the 19,800-square-foot ITT Educational Services Inc. transaction in Corona and the 14,971-square-foot relocation of the Employment Development Department in the Commercenter/Tri-City submarket of San Bernardino.

Data and analysis provided by CB Richard Ellis Group Inc.

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