Real Estate Watch: Inland Empire
Positive Absorption in Both Industrial and Office
The Inland Empire industrial market delivered 2.9 million square feet of new industrial product in 25 projects in the fourth quarter, with 6.4 million square feet remaining under construction as it drew to a close. Approximately 6.9 million square feet of gross activity was experienced in the quarter, bringing the year-to-date total to 31.4 million square feet. Net absorption for the quarter was approximately 2.8 million square feet, topping off a year that saw a total of 14.7 million square feet of positive net absorption. The average industrial lease rate dropped 1 cent, to end the year at 39 cents per square foot per month.
During the fourth quarter, the Inland Empire industrial market experienced a marginal (5%) increase in vacancy to 4.6% from the third quarter’s 4.2%. This increase can be attributed to the effect of the completed construction that entered the market during the quarter.
In gross activity, Ontario led the other cities of the Inland Empire with 2.7 million square feet of sale and lease activity, 39% of the total for the region.
The Inland Empire industrial market delivered more than 18.6 million square feet of new construction to the market in 2001, bringing the total market base to more than 249 million square feet of industrial product. The Inland Empire office market ended 2001 with a total of 866,538 square feet of positive net absorption, up 58% from 2000. This is quite a statement of the continued strength of the Inland Empire office market. With positive net absorption, the office vacancy rate declined 9% from third quarter’s 16.2% to 14.8% in the fourth quarter. At $1.45 per square foot per month, the average asking full-service-gross lease rate for office space increased 8 cents from the fourth quarter of 2000.
Ontario experienced the largest decline in vacancy, 17%, from 14% in the third quarter to 11.6% in the fourth quarter, leaving San Bernardino as the only city with a vacancy rate of more than 20% in the Inland Empire. Vacancy rates ranged from a low of 3.4% in Grand Terrace to San Barnardino’s 21.8% at the high end.
Cities demanding the highest lease rates included Ontario with an average of $1.65 per square foot and Redlands, with an average of $1.63 per square foot. Redlands experienced an increase of 18 cents (12%) from the third quarter. As expected, Class A space reported the highest rent of $1.65 per square foot.
During the fourth quarter, 50,000 square feet were added to the office base as development wrapped up on 4300 Green River Drive in Corona. Two new buildings in Riverside broke ground during the fourth quarter totaling 72,469 square feet. The Inland office market had 326,077 square feet under construction at the close of the fourth quarter and 702,717 square feet in the planning stages.
Analysis provided by CB Richard Ellis’ Global Research and Consulting.
