The blistering pace of market activity set during 2000 may be yielding to more normal rates. While some key market indicators maintained or surpassed those of the first quarter of 2000, others could be the first signs of a cooling trend. Transaction activity and construction completions during the first quarter were up 2% from the first quarter of 2000. Following suit, industrial vacancy rates tightened 36% from a year ago. But there was a slowing of net absorption, which caused the availability rate to rise approximately 7%. Nonetheless, the Inland Empire industrial market remains strong and continues to grow at healthy,and arguably more normal,rates.
Voracious demand in the past 12 months decreased the vacancy rate 36% to 3.3% from 4.5% in the first quarter of 2000. Although 3.5 million square feet of net absorption in the first quarter of 2001 soaked up most of the 4.5 million square feet of construction completions, it was not enough to prevent an uptick in quarterly vacancy from the historic low of 2.9% last quarter.
For the first time in five consecutive quarters, the average asking gross lease rate finally rose, albeit 1 cent, to 42 cents. During the quarter, average asking manufacturing and warehouse gross lease rates ranged from a low of 25 cents to a high of 68 cents.
Continuing the pace set during the last half of 2000, more than 11 million square feet were under construction for the third consecutive quarter. And while construction completions were slightly higher than the year-ago number, first-quarter deliveries were down 25% to a more manageable level from the huge fourth quarter figure.
The first-quarter figures hint at a tightening office market. Positive net absorption continued for the 10th straight quarter and vacancy rates continued to decline as lease rates increased.
The Inland Empire office vacancy rate decreased to 15.7%, the lowest rate in more than six years. Stimulated by strong activity in Riverside and San Bernardino, the market as a whole experienced approximately 106,146 square feet of positive net absorption to begin the year.
The first quarter average asking lease rate for office space jumped to $1.41 per square foot per month. In the past 12 months, the average asking lease rate appreciated approximately 4.4% from $1.35 in the first quarter of 2000. Cities demanding the highest lease rates included Corona with an average of $1.63 per square foot and Ontario, with an average of $1.58 per square foot.
The Fairway Business Centre in Rancho Cucamonga was completed during the quarter, adding 90,000 square feet to the market, more than 42,000 square feet of that pre-leased. Seven office buildings totaling 325,146 square feet were under construction and another 51,466 square feet broke ground.
Analysis provided by CB Richard Ellis’ Global Research and Consulting.
