The Inland Empire industrial market continues to experience steadily increasing levels of demand.
Even though the local economy continues to struggle, increased trade passing through the region’s warehouse and distribution facilities is strengthening the industrial market.
Leasing activity improved in the second quarter, which can be attributed in part to lower rents and attractive lease concessions that attracted tenants away from congested coastal areas.
In the second quarter, there were 98 leases totaling 6.2 million square feet, of which 66% occurred in the Inland Empire West submarket. Sales contributed just shy of 2 million square feet to total activity.
Average asking lease rates dropped 1 cent this quarter to 34 cents per square foot. This latest decline is an 11% drop since the second quarter of 2009, and a 24% fall since the 45 cents per square foot peak in third quarter 2007.
The overall Inland Empire industrial market experienced a decline in both availability and vacancy levels in the second quarter. The availability rate—which includes both occupied direct and sublease space—decreased slightly to 15.7% from the first quarter’s 15.9%.
The overall vacancy rate declined from 8.5% in the first quarter to 7.4%. The increase of occupied space is a result of the 3.6 million square feet of absorption in the second quarter and larger tenants staying put.
Office Market
The Inland Empire office market struggles to catch a break, although it is beginning to feel some relief after enduring the effects left by the recession. The region’s overall vacancy rate experienced a dip in the first part of 2010, but started to tick up in the second quarter. The office market is working through an oversupply of space and high unemployment levels, and is on pace for a slow and steady recovery.
The overall Inland Empire vacancy rate experienced a minimal increase in the second quarter to 23.8%, up less than 1% from the first quarter’s 23.7%. The amount of available space—which includes both occupied direct and sublease space—stands at 29%.
The second quarter experienced relatively flat absorption, posting a negative 4,782 square feet. The bulk of the demand was seen in the Inland Empire West submarket which recorded more than 40,000 square feet of absorption. This was offset by the reduction of occupancy in the Inland Empire East submarket of about 46,000 square feet.
Inland Empire’s low rents continue to provide the market with a competitive advantage over the neighboring counties. At $1.80 per square foot, the overall average asking lease rate shed 9 cents in the second quarter. This is a result of landlords advertising reduced rents in efforts to attract a broader range of tenants to their space.
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.
