The Inland Empire industrial market continued to grow in total gross activity during the third quarter, maintaining an upward trend that picked up in the second quarter after a relatively slow first quarter.
The industrial market generated 10.1 million square feet of gross activity, resulting in an increase of 3.9% over the second quarter. There were 5.9 million square feet generated in the Inland Empire East submarket and 4.2 million square feet of activity in the Inland Empire West.
The 10.1 million square feet of gross leases and user sales translated into 3.9 million square feet of positive net absorption. Activity in buildings smaller than 100,000 square feet continued to grow at an accelerated pace, accounting for 81% of the transactions in the third quarter.
The average asking lease rate in the Inland Empire East dropped 2 cents from the second quarter to 36 cents per square foot, and the rate in the Inland Empire West remained stagnant at 43 cents per square foot. Overall, the average asking lease rate fell 1 cent to 38 cents per square foot.
The total vacancies of the Inland Empire West and Inland Empire East combined for an overall 4.6% vacancy rate at the close of the quarter, an increase from 4.3% in the second quarter and from the 4.4% recorded one year earlier.
Office Market
After a robust second quarter, with huge gains in absorption and a significant drop in the vacancy rate, the Inland Empire office market slowed during the third quarter.
The overall health of the market has improved, but the high surge in tenant activity subsided as tenants grew a bit hesitant, still wanting to hold out for favorable deals, as premium space becomes limited. The overall performance of the office market through the end of the third quarter was positive due to modest gains in net absorption and a slight drop in vacancy.
The vacancy rate at the end of the quarter was 17%, down from the 17.1% in the second quarter. The slight drop indicates property tours have remained at healthy levels throughout the Inland Empire. The vacancy rate is expected to fall in the absence of new construction as the year comes to a close.
Analysis provided by CBRE Research
