Driven by the influx of e-commerce and brick-and-mortar distribution giants, the demand for industrial space in the Inland Empire kept outstripping supply during the first quarter of 2000.
Among the major new deals, Walt Disney Co. leased more than 300,000 square feet of warehouse space in the Haven Gateway project in Ontario for distribution of consumer products.
In addition, Home Shopping Network is moving into an 817,000-square-foot building in Fontana, while eToys Inc. has leased a 760,000-square-foot building in Ontario.
Meanwhile, Wal-Mart, Home Depot and Toys R Us are all moving into the Mira Loma area in a big way.
“The market is as strong as it’s ever been,” said Chuck Belden, associate director of the Ontario office of Cushman & Wakefield; Inc.
About 7.6 million square feet of industrial space was leased in the Ontario, Rancho Cucamonga, Chino, Fontana and Mira Loma areas during the first quarter. That sent the industrial vacancy rate dropping a full percentage point from 8 percent in the fourth quarter of 1999 to 7 percent in the first quarter of this year.
The average per-square-foot monthly asking rate for industrial space jumped from 28 cents to 30 cents over the same period.
Huge distribution centers are moving to the Inland Empire because there simply isn’t room for them in central L.A. areas like Santa Fe Springs and Commerce, said Kent Hindes, a senior vice president at Collins Commercial in Ontario.
Lower overall costs are also luring corporate America to the Inland Empire, where Hindes estimates that companies pay 30 to 40 percent less to do business because the area has cheaper space and lower wages than L.A. County.
Ontario is the site of a number of major industrial projects. California Commerce Center Four broke ground in February on an addition that will contain more than 1 million square feet.
Nearby, Mira Loma is also becoming a major distribution center for consumer products. Wal-Mart now has four buildings in the area and added 750,000 more square feet during the first quarter. And Home Depot recently broke ground on what Hindes describes as a “mega-distribution center” in Mira Loma, which is located near the intersection of Interstates 10 and 15.
In fact, the area is such an attractive market that J.W. Mitchell is developing a 760,000-square-foot warehouse purely as a speculative venture, said Hindes, who expects Mitchell to have no problem finding tenants for the project.
In the years ahead, an extension of the Foothill (210) Freeway connecting Interstate 15 with the eastern San Gabriel Valley should open up more areas for development, said Henry Johnson, a senior vice president and principal at Trammell Crow Co. in Los Angeles.
However, Belden and Hindes foresee resistance to the development of large distribution centers in that area because of the strain such projects place on local infrastructure.
Office space is also experiencing healthy demand in the Inland Empire. The vacancy rate for class-A space fell from 16.7 percent in the fourth quarter of 1999 to 15.0 percent in the first period of this year. Meanwhile, the asking rent per square foot stayed flat at $1.53, according to Grubb & Ellis Co.
Tenants are having a hard time finding offices of more than 10,000 square feet in the Riverside and San Bernardino areas, said Tom Perik, a senior vice president at Lee and Associates in Riverside. A number of developers are trying to address this situation with plans for new projects.
Legacy Partners plans to break ground this summer on the Rancho Corporate Center, an office park with 280,000 square feet of space in Rancho Cucamonga. The project is designed to have three, two-story buildings constructed in phases. The first phase will have 220,000 square feet while the second will have 60,000 square feet.
A number of developers have also targeted the city of Corona, just west of Riverside. California Corporate Buildings is scheduled to start grading on its Corona Corporate Center II project, just west of Interstate 15, at the end of this month. The project will consist of two, three-story buildings with 60,000 square feet each. Perik said three major tenants have already signed letters of intent to lease space there, but he declined to identify them.
Another major project Riverside University Village Tower is a four-story, class-A office project proposed by Southland Partners, which hopes to apply for permits next month, Perik said.
