The Inland Empire’s industrial segment saw 6.2 million square feet of gross absorption in the second quarter, taking its year-to-date total to 14.3 million square feet.
The Inland Empire East submarket had 3.3 million square feet of activity, helped along by a 599,654-square-foot building in Rialto leased by Razor Corp., a technology services company.
Another notable deal in the east submarket was a 449,040-square-foot building sold to Ross Stores in Riverside.
Gross Activity
The Inland Empire West saw 2.9 million square feet of gross activity in the second quarter, including the sale of a 402,539-square-foot building in Fontana that also was leased to Costa Mesa-based Anna’s Linens Inc. in a separate deal during the period.
Gross activity in the Inland Empire fell by 1.9 million square feet compared to a year earlier, but its net absorption was on par with the second quarter of 2010 at 5.9 million square feet.
There was positive net absorption of 2.7 million square feet in the second quarter.
The Inland Empire’s availability rate dropped to 12.2% from 12.8% the prior period.
The decline came even with the addition of about 3.8 million square feet of new buildings.
The overall vacancy rate in the Inland Empire edged down to 6.3% in the second quarter from 6.4% for the prior period.
Speculative development is beginning to pick up, with 1.3 million square feet currently under construction in the region. TA Realty Advisors broke ground on a 697,578-square-foot building in Perris. Carson-based Watson Land Co. is completing a 616,542-square-foot building in Redlands.
The Inland Empire office market continued a gradual recovery from the economic downturn during the second quarter.
Facing Obstacles
The market continues to encounter obstacles to a full rebound.
Historically high vacancy levels in the office segment continue as recently completed speculative space sits unoccupied and many tenants who are prospects for expansion remain on the sidelines.
The office market is cautiously moving in a positive direction going into the second half of 2011.
In the second quarter, the vacancy rate fell to 23.5% from 24% in the prior period and 24.3% a year earlier.
Available Space
The total amount of available space—which includes occupied direct and sublease space—decreased to 28.1% in the second quarter. That came with an uptick in demand that amounted to 136,010 square feet of positive net absorption.
The Inland Empire East submarket accounted for 99,078 square feet of positive absorption. Inland Empire West saw 36,932 square feet of the total.
Construction of new office space remains minimal. There is currently one property under construction and due to bring 141,133 square feet to market by year’s end.
Another development, the Ontario Airport Corporate Park, came to a halt in the second quarter, and the five-building project is on hold.
IE’s Advantages
The competitive advantages the Inland Empire possesses will eventually lead to a recovery. Economic conditions are projected to improve at a sustained pace in 2011 and into 2012.
Job growth is a key component to economic stability and the health of the Inland Empire office market. A recent report by CBRE Econometric Advisors forecast 8,900 new office jobs in the region for 2011 and 2012 combined.
Other key drivers to the Inland Empire’s economy include housing that’s become more affordable and relatively low costs of doing business.
The region’s history of strong population growth and quality buildings also are expected to continue to attract companies to the Inland Empire market.
Analysis provided by CB Richard Ellis’ Global Research and Consulting.
The Real Estate Watch Chart
Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
