The Inland Empire industrial market had robust growth in the first half of the year as tenant demand for space of less than 500,000 square feet continued to propel the market.
The demand can be primarily attributed to tenants feeling more confident about leasing space in the region as the economy continues on a solid footing. The market has been experiencing an increase in demand and activity in all size ranges, and landlords have continued to raise asking rates.
The emerging presence of several big-box e-commerce fulfillment centers has resulted in more activity in smaller buildings in an effort to support larger fulfillment centers. The market was strong overall, with gross activity levels soaring to 10.9 million square feet in the second quarter.
The overall average asking lease rate ended the quarter at 41 cents per square foot, up 2 cents from the first quarter. Asking lease rates in the Inland Empire West finished at 44 cents per square foot, up 2 cents, and the Inland Empire East recorded an average asking lease rate of 40 cents per square foot, up 2 cents.
There were 53 buildings under construction totaling more than 19.8 million square feet in the region at quarter’s end, of which 4.2 million square feet has been preleased. A majority of the activity is in Inland Empire East, totaling 14.3 million square feet. Over 5 million square feet was delivered to the market, with 3.4 million square feet preleased or leased upon completion. A large majority was in Inland Empire West.
The Inland Empire office market trended fairly positive in the quarter and was in line with other activity in the market. The Inland Empire West’s swing to negative net absorption was caused by Corinthian College vacating 40,817 square feet in Ontario, while Edison gave back roughly 150,000 square feet in Rancho Cucamonga due to corporate downsizing.
The Inland Empire vacancy rate went up to 15.4% during the second quarter from 15.3%. Occupancy in Inland Empire East improved while the Inland Empire West regressed.
Analysis provided by CBRE Research
