Real Estate Watch: Inland Empire
Job Growth Drives Industrial, Office Markets
Industrial Market
The Inland Empire’s work force continues to grow, even as the national job market continues to be weak. At 5.7%, the Inland Empire unemployment rate was unchanged in the first quarter. It remains lower than California’s unemployment rate of 6.3%.
The Inland Empire industrial vacancy rate saw a minor uptick in the quarter, with positive net absorption of 4.3 million square feet. The average asking gross lease rate decreased one penny to 38 cents per square foot, its first change after five quarters.
The vacancy rate in the Inland Empire’s east submarket rose 27% to 3.6%, due in part to the 1.1 million square feet of newly constructed available space. In the west, the vacancy rate fell to 5.2% in the first quarter.
The Inland Empire saw about 6.5 million square feet of gross activity in the first quarter.
The city of Ontario continued to lead the Inland Empire with 1.5 million square feet of sale and lease activity for the quarter,23% of all activity in the region.
The Inland Empire industrial market had 4.3 million square feet of positive net absorption in the quarter.
There were 23 buildings that completed construction during the first quarter for a total of 5.1 million square feet.
Fifty-seven buildings with a total of 3.2 million square feet currently are under construction, with 37 million square feet of projects planned in the next two years.
Office Market
Full service gross lease rates for office space in the Inland Empire increased two cents to $1.58 in the quarter.
With 112,256 square feet of positive net absorption, the Inland Empire office vacancy rate saw a decrease of 4.6% to 11.4% at the end of the quarter.
Class A office space reported the highest vacancy rate in the Inland Empire at 13%. By city, vacancy rates ranged from a low of 2.1% in Norco to a high of 16.8% in San Bernardino.
The Inland Empire office market began 2003 with about 112,256 square feet of positive net absorption.
Although the Inland Empire east submarket reported 42,257 square feet of negative net absorption, the entire market was energized by the 154,513 square feet of positive net absorption in the west.
In the past 12 months, the average asking gross lease rate has risen nearly 13%.
That trend continued in the quarter, with average asking gross lease rates in the office market increasing 16 cents to $1.58 per square foot.
Cities seeing the highest lease rates included Ontario, with an average of $1.78 per square foot.
Analysis provided by CB Richard Ellis’ Global Research and Consulting.
