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Market Conditions Improve in the Inland Empire

The Inland Empire’s industrial market continues to display growth midway through the year.

Gross activity totaled more than 5.8 million square feet at the end of the second quarter, with roughly 1.8 million square feet in the Inland Empire East and about 4 million square feet in the Inland Empire West.

The Inland Empire generated approximately 3 million square feet of positive net absorption, bringing the year-to-date total to 6.3 million square feet.

Vacancy and availability rates have continued on a downward trend and are nearing prerecession levels, partly due to the slowing of newly constructed buildings.

The overall vacancy rate fell from 6.2% to 5.4% at the end of the quarter, while the availability rate fell from 11% to 10.5%. But vacancy and availability rates could slightly tick back up over the next year due to 11 million square feet of product under construction.

Construction

About 3.3 million square feet of construction broke ground during the quarter, and of the 11 million square feet under construction, about 2.6 million square feet has already been absorbed.

The overall average asking lease rate remained static at 38 cents per square foot, triple net, unchanged from the first quarter. But the number can be slightly misleading due to the fact that many big-box buildings don’t advertise asking rates. CBRE Econometric Advisors is projecting lease rates to continue their upward momentum as supply for big-box product continues to diminish and tenant demand remains strong.

Office Market

The Inland Empire’s office market is slowly rebounding as occupancy growth increases and lease rates are stabilized, due in part to small businesses returning and unemployment dropping. Activity maintained steady improvement from the first quarter, with another quarter of positive net absorption.

The Inland Empire had a healthy increase in net absorption, generating 91,286 square feet. The vacancy rate fell to 19.4%, down from 19.8% at the end of the first quarter. The vacancy rate is projected to drop into the 18% range early next year.

The average asking lease rate ended the quarter at $1.72 per square foot, declining 1 cent from the first quarter.

Lease rates are projected to grow 1% by the end of 2014.

Analysis provided by CBRE Research.


The Real Estate Watch Chart

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

CLICK HERE to download the current REAL ESTATE WATCH CHARTS

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