Industrial Market
The Inland Empire industrial market began 2010 with increased levels of demand, resulting in improved leases and sales. Although companies still are struggling with their inventory forecasts and space commitments, available space continues to be delivered, which has increased the overall availability rate.
The market shows signs that rental rates have leveled out and may soon rise.
The entire Inland Empire had varying levels of increases and decreases in the availability and vacancy levels compared to the previous quarter. The fourth quarter’s availability rate of 15.5% increased to 15.9% in the first quarter. Conversely, the vacancy rate declined from 9% to 8.5% in the first quarter.
The vacancy decrease can be attributed to the slowdown of large tenants moving out of the market.
The Inland Empire east vacancy level decreased to 12.2% in the first quarter from 13.8% posted in the fourth quarter, while the Inland Empire west submarket saw a slight increase from to 6% to 6.1%.
There has been a recent trend of big discount retailers, such as Dollar Tree Inc. and Kohl’s Corp. purchasing large buildings.
Office Market
Moving into 2010, the Inland Empire office market continues to struggle with many of the same issues that affected the region in the previous year. Continued economic uncertainty, rising unemployment rates and a volatile real estate market continue to prolong the road to recovery. But there is some optimism.
The overall Inland Empire vacancy rate saw a slight decline in the first quarter to 24%, down from the fourth quarter’s 24.4%. The amount of available space, which includes both occupied direct and sublease space, remained unchanged at 28.6%. The first quarter marked the third consecutive quarter of positive absorption for the market with 91,099 square feet of positively absorbed space. Some of this momentum can be attributed to appealing average asking lease rates, which give the Inland Empire its competitive advantage. At $1.89 per square foot, the average asking lease rate shed 15 cents in the first quarter, resulting from landlords advertising reduced rents in efforts to attract tenants.
Many leading economists forecast recovery of the Inland Empire office market to take place in the latter part of 2010 and into 2011. A recent report by CB Richard Ellis Group Inc.’s Econometric Advisors said that the Inland Empire is expected to see growth in office employment, which is the primary determinant of demand. The region is forecasted add 6,700 office jobs during the 2010 and 2011.
Data and analysis provided by CB Richard Ellis Group Inc.
The Real Estate Watch Chart – Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
