The Inland Empire industrial market picked up the pace in the second quarter after a relatively slow start to the year, generating nearly 9.7 million square feet of gross activity.
E-commerce has been a driver in the market, and Amazon is continuously looking to expand as it leads the way in the online retail business. To compete with it, companies such as Wal-Mart, Ashley Furniture, and Medline are aggressively looking for space to expand their e-commerce business.
IE West, East
The Inland Empire West continued to be an attractive market due to its proximity to Orange and Los Angeles counties, freeway infrastructure, and port access. The average asking lease rate in the submarket has been on an upward trend. It increased 13% year-over-year, ending the quarter at 43 cents per square foot.
The average asking lease rate in the Inland Empire East increased 2.7% year-over-year to 38 cents per square foot.
Overall, the average asking rate increased just 1 cent since the second quarter of 2013 to 39 cents per square foot. CBRE Econometric Advisors forecasts the overall average asking lease rate to grow 8.7% over the next 12 months.
Vacancy, Availability Rates
The overall vacancy rate moved up 30 basis points from 4% in the first quarter to 4.3% at the end of the second due to a significant amount of new construction.
Nearly 8.4 million square feet in 18 buildings of new inventory was delivered to the market. The Inland Empire East experienced the majority of the increase, climbing from 5.1% to 6.2%. It also had the most inventory delivered during the quarter: 5.2 million square feet.
The availability rate also moved up from 7.8% in the first quarter to 8.2% at the end of the second.
Vacancy and availability rates remained below those recorded a year ago: 4.8% and 8.7%, respectively.
Office Market
The Inland Empire had a flurry of robust activity. The pickup in velocity and activity was partly due to tenants looking to get deals done as supply shrank. Small businesses returned to the region, and commercial real estate entities began to experience the much-anticipated rebound.
The overall performance of the Inland Empire office market was positive due to declines in the unemployment rate and significant gains in absorption.
The office market finished the quarter with positive net absorption of 267,604 square feet. Transactions such as the Riverside Department of Public Health leasing 40,000 square feet in Riverside and Morongo Tribal TANF Program leasing 20,000 square feet in San Bernardino County helped contribute to the uptick. There was no dominant industry leading the way.
The vacancy rate was 17.1% at quarter’s end, down from 18% in the first quarter. It is expected to fall in the absence of new construction.
Analysis provided by CBRE Research
