Industrial Market
The Inland Empire industrial market saw substantial growth in the fourth quarter with more than 4 million square feet of positive absorption, a 27% rise from the third quarter.
Rising construction costs and increasing land values continue to play a major role in the growth of the Inland Empire industrial market, as large parcels of land become difficult to find in the west, pushing tenants toward the east.
Construction completed in the fourth quarter totaled 8 million square feet, an increase of 4.6 million square feet from the third quarter.
Average asking lease rates held steady at 43 cents per square foot in the fourth quarter.
Average asking sales prices increased from $105.54 per square foot in the third quarter to $107.86 per square foot this quarter.
There remains 17 million square feet of industrial space under construction in the Inland Empire with the east contributing 13.5 million square feet and the west building 3.6 million square feet.
Office Market
The Inland Empire office market showed strong fundamentals in 2006 with space added to the market and sustained growth in asking lease rates.
Leasing in Riverside, San Bernardino, Ontario and Rancho Cucamonga led to an increase in overall absorption in the fourth quarter, with 333,855 square feet of positive absorption, almost double the third quarter.
As a result, lease rates rose to $1.85 per square foot in the fourth quarter, representing a 1.6% increase between quarters and an annual increase of 5%. With space coming available and strong tenant demand, lease rates should stabilize in 2007.
Despite construction, vacancy rates continued to fall to 7.9% in the fourth quarter, compared to 8.8% the prior quarter.
As employment levels continue to rise, and with strong population growth expected in 2007, the Inland Empire office market will hold strong in the new year as the steady inflow of space meets demand.
Analysis by CB Richard Ellis’ Global Research and Consulting.
INDUSTRIAL MARKET: Single-tenant manufacturing and warehouse buildings 10,000 square feet or larger. Availability is for direct lease space only and does not include sublease space. Absorbed square feet does not include preleased space. Lease rates are per square foot, per month, excluding free rent, tenant improvements and other concessions and weighted by vacant square feet. Historical figures have been adjusted to reflect changes to the base. Historical figures reported may not agree to previously reported figures.
OFFICE MARKET: Not all buildings in this market area have been assigned a building type. Class A is three-story and above institutional quality, steel frame buildings. Class B is single- and two-story garden office and concrete tilt-up buildings. Class C is other single- and two-story buildings, as well as business parks. Average asking rates are for vacant available space in buildings 10,000 square feet and larger. The average asking lease rate is calculated on a building-by-building basis and weighted by the amount of vacant available square footage in that building. Lease rates are full-service gross, per square foot, per month. Average asking lease rates should be used for comparative purposes only and are not necessarily indicative of any given lease rate within the market. Vacant space is space currently available for direct lease and does not include sublease space.
