Industrial Market
The industrial market continued to grow in the third quarter by adding an additional 3.7 million square feet of space to the market. Tenant demand remains strong across all submarkets with the Redlands/Loma Linda and Fontana submarkets leading the Inland Empire with a combined total of 1.6 million square feet of activity in the third quarter.
Tenant demand continues to be driven by one of the market’s most dominant employment sectors, the trade, transportation and utilities sector, which has added close to 12,000 jobs to the Inland Empire’s employment during the past year. Sales activity held steady as the cost of ownership remained high.
Overall net absorption in the third quarter totaled 2.4 million square feet, a decrease of 2.3 million square feet from the second quarter. The western submarkets were the most active with 1.25 million square feet of net absorption this quarter, compared to 1.13 million square feet of net absorption in the eastern submarkets. A recent trend that has occurred in that submarket is that for the first time the eastern section outpaced the western in construction.
Office Market
Despite the rising default in the subprime mortgage sector, the Inland Empire office market remains diverse in its tenant base and has shown incredible resilience to the softening markets as a result of the subprime mortgage meltdown. Increased demand for space from large law firms, larger floor plate users such as back-office tenants with processing centers, schools and engineering and insurance firms, has kept the market buoyed.
Tenant demand continued to hold in the third quarter with 213,409 square feet of net absorption. The area’s expanding infrastructure, along with a demographic shift to an older, better-educated labor base, has helped spur corporate migration to the area in 2007,a trend that is expected to continue into 2008 and beyond.
The overall vacancy posted an increase in the third quarter rising to 11.2%, compared to 8.7% in the second quarter. With the completion of 831,453 square feet of office space in the third quarter and another 2 million square feet of new office space under construction, vacancy rates are expected to rise.
Analysis provided by CB Richard Ellis’ Global Research and Consulting
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