Overall the real estate market seems to be picking up in the Inland Empire.
The area marked growth in construction activity in the industrial sector during the second quarter. Just over 2.8 million square feet of new speculative development broke ground for a total 7.3 million square feet under construction.
Construction
The quarter represented the highest level of construction activity since the second quarter of 2008. Developers are becoming less risk adverse as the supply of state-of-the-art, big-box buildings continues to lessen within the Inland Empire industrial market.
The second quarter ended with just over 7 million square feet of gross activity, representing a year-over-year increase of about 1 million square feet. The 2012 year-to-date gross activity now totals approximately 12.5 million square feet.
Industrial activity was relatively evenly distributed throughout the Inland Empire with the East submarket generating 3.4 million square feet and the West submarket generating 3.6 million square feet of the total.
Net absorption for the quarter doubled since the first quarter, totaling 4.4 million square feet for the highest amount of industrial net absorption since the second quarter of 2007. At the end of the second quarter, the year-to-date net absorption for the Inland Empire market now totals about 6.7 million square feet.
The second quarter revealed a 6.6% vacancy rate and an 11.8% availability rate, dropping from 7.4% and 12.5% from the first quarter, respectively.
Market momentum in the Inland Empire’s office market early in the year carried over to the second quarter.
Vacancies
Office vacancies have yet to drop significantly, in large part due to newly constructed speculative space that remains unoccupied. The overall vacancy rate has kept above the 20% mark since the end of 2008. The vacancy rate remained unchanged at 23.3% in the second quarter, slightly higher than the 23.2% rate a year ago.
Continued demand resulted in 101,439 square feet of positive net absorption, representing double the amount recorded in the previous quarter. The Inland Empire East had 61,792 square feet of positive absorption in the second quarter, while the Inland Empire West submarket which accounted for 36,647 square feet. That brought the 2012 year-to-date total to 152,047 square feet of positive net absorption.
The average asking lease rate for office space posted a 3-cent gain to $1.70 per square foot.
The Inland Empire remains saturated with existing office projects constructed prior to the economic downturn. Construction of new office space remains minimal while no additional office projects are planned to break ground.
Analysis by CBRE Group Inc.
The Real Estate Watch Chart
Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
