The Inland Empire ended 2013 with increased gross industrial activity as it wrapped up the year with roughly 29.1 million square feet, up 2.6 million square feet from 2012.
The Inland Empire West submarket generated the majority of the activity, with nearly 19.2 million square feet, and the Inland Empire East contributed the remaining 9.9 million square feet.
There was 7.9 million square feet of activity in the fourth quarter, resulting in 4.2 million square feet of net absorption. Year-end net absorption totaled 14.9 million square feet, a 3.3-million-square-foot increase over 2012’s 11.6 million square feet.
The fourth quarter, with its steady demand and shrinking supply, was the fourth consecutive quarter the Inland Empire experienced a drop in vacancies. At year-end, the Inland Empire recorded an overall vacancy rate of 4%, down from 4.4% in the third quarter and from 6%. The availability rate for the Inland Empire dropped to 7.6% from 8.2% in the third quarter, down from 8.7% in the fourth quarter of 2012. There were 119 transactions during the quarter.
The overall asking lease rate remained static at 39 cents per square foot, but it increased 8.3% from the 36-cents-per-square-foot rate in the fourth quarter of 2012.
The Inland Empire will continue to see an increase in asking rents as demand grows and the available supply lags, but growth will slow as it reaches near-peak levels. Speculative development continued to increase due to continued demand and absorption of space.
At quarter’s end, 14.5 million square feet was under construction and 2.6 million square feet of new inventory was delivered to the market, bringing the annual total to 8 million square feet.
Office Market
The Inland Empire metropolitan area saw many positive economic signs in 2013. The incremental success throughout the year was bolstered by a rebounding real estate market.
The overall performance of the Inland Empire office market improved from the beginning of the year, when vacancy rates fell more than 21% throughout the region. The positive trends that took place during the year included the vacancy rate dropping by 3%, a higher demand for quality space, and falling availability, especially for class A space. But the fourth quarter was flat compared to the rest of the year.
The office market took a minor step back in the fourth quarter, generating 4,105 square feet of negative absorption, the end of the office market’s streak of positive absorption. The vacancy rate at the end of the quarter was 18.3%, unchanged from the third quarter.
Analysis provided by CBRE Research.
