With limited land in both the East and West, developers have started to progressively move to the North, building new land projects and smaller industrial buildings in Victorville, Apple Valley, Hesperia and Adelanto.
With the limited supply of land and buildings for sale in the West, developers are finding it increasingly difficult to enter the Inland Empire industrial market. That’s sparked an influx of projects in the East,Moreno Valley, Perris and Riverside.
Most of the construction in the first quarter was added to Moreno Valley, 935,466 square feet.
An additional 3 million square feet of construction began in the first quarter, coupled with 19.2 million square feet of industrial space under construction. Overall net absorption was more than a positive 5.1 million square feet, an increase of 1.1 million square feet from the 4 million square feet of positive absorption seen in the fourth quarter.
There was increased demand for sale/leaseback deals as tenants unlocked the value of their real estate, invested the funds to grow their primary business or to repay existing debt. Some of the larger consolidation leases took place in Riverside where VSE Corp. occupied 341,000 square feet and Galleria occupied 1 million square feet of space in Fontana.
Leasing in the first quarter was more than 6.5 million square feet, with 77% of the activity in the West, notably Ontario and Fontana.
The overall availability rate decreased to 7.2%, a 0.9% drop from the fourth quarter. Most of the decline can be attributed to a fall in availability in the West, with a 1.6% decline between quarters to 5.38% in the first quarter.
The overall vacancy rate also experienced another decline to 3.6% in the first quarter, compared to 4.3% in the fourth quarter. Vacancy in the Inland Empire West hit an all-time low of 1.8% this quarter, falling 1% from the fourth quarter.
The average asking rental rate held steady at $0.43 per square foot this quarter, with a decrease in asking rents in the East offset by an increase in asking rents in the West.
Analysis provided by CB Richard Ellis’ Global Research and Consulting.
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