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Inland Empire Shows Signs of Modest Momentum

The Inland Empire’s industrial market continued to see growth through the third quarter, while its office-space segment also continued to gather positive momentum.

Gross activity for industrial properties totaled 19.8 million square feet through September. The third quarter added just more than 7.3 million square feet, up from 7 million square feet in the second quarter. Yet gross activity decreased by 3.6 million square feet when compared to the first three quarters of 2011.

Net absorption for the Inland Empire market totaled about 9.1 million square feet at the end of the third quarter; an increase of just more than 200,000 square feet of net absorption took place compared to the first nine months of last year.

Availability and vacancy rates declined in the industrial segment for the second quarter in a row. The third quarter revealed a 6.3% vacancy rate and an 11.3% availability rate, down from last quarter’s 6.6% and 11.8%, respectively.

Office Market

The Inland Empire’s office market continued the momentum started in the first half during the third quarter.

Vacancy levels continued to move downward but have yet to drop significantly. This was in large part due to newly constructed speculative space that remained unoccupied.

The overall vacancy rate has kept above the 20% mark since the end of 2008.

Vacancy in the third quarter dipped to 23.1% from a previous 23.4%.

The current vacancy level is nearly the same as levels seen last year, but it does fall below the peak of 23.9% in the third quarter of 2009.

Continued demand resulted in 77,068 square feet of positive net absorption, falling below the amount recorded in the previous quarter.

Inland Empire East had 52,772 square feet of positive absorption during the third quarter, while the area’s western submarket accounted for 24,296 square feet. That brought the nine-month total to 229,115 square feet of positive net absorption.

The average asking lease rate for office space remained at $1.70 per square foot, representing a strong competitive advantage for the region in contrast to other Southern California markets. The East submarket also carries an unchanged rate of $1.65 per square foot, while the average asking rate for Inland Empire West holds at $1.76 per square foot.

Analysis provided by CBRE Group Inc.


The Real Estate Watch Chart

Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.

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