Industrial Market
Strong demand fueled approximately 6.7 million square feet of positive net absorption of industrial space, driving the Inland Empire industrial vacancy rate to 3.5% in the third quarter, from 3.8% in the second quarter. It was the 10th consecutive quarterly decline in the industrial vacancy rate. In the preceding 12 months, the vacancy rate decreased 63%, from 5.8% in the third quarter of 1999.
Lease rates rebounded from a drop in the fourth quarter of last year and have since then stabilized at 41 cents per square foot per month. Third-quarter average asking manufacturing and warehouse gross lease rates ranged from a low of 29 cents to a high of 47 cents.
After a year of steady decline, industrial construction dropped off slightly again due to the great consumption of land in the prior year. At the end of the third quarter, the Inland Empire industrial market had a total of 11.4 million square feet of space under construction, a 34% decrease from the 15.3 million square feet that were under construction at the end of the second quarter.
Office Market
Across the board, the third-quarter market indicators signaled a tightening office market. Vacancy rates continued to decline, lease rates decreased slightly, and healthy, positive net absorption continued to be experienced.
The Inland Empire office vacancy rate decreased to 16.9%, the lowest rate in almost six years. The vacancy rate for the Inland Empire office market has dropped continuously over the past nine quarters, from 25.1% in the second quarter of 1998 to its third-quarter low, a 33% decrease. Fueled by strong activity in Moreno Valley, San Bernardino and Ontario, the market as a whole experienced approximately 221,000 square feet of positive net absorption of office space.
At $1.37 per square foot per month, the average asking full-service gross lease rate for office space rebounded 3 cents from the 1 cent dip taken last quarter. The average asking lease rate had appreciated approximately 4% from $1.32 in the third quarter of 1999.
Five buildings, totaling 255,514 square feet, were under construction, an increase of 11% from the 229,584 square feet under construction in the second quarter.
