After years of serving as a shining example of the country’s economic good times and real estate boom, the Inland Empire’s industrial and office markets continued to decline last quarter along with the nation’s economy.
Industrial vacancies grew by more than a half-percent during the July-September period, to 8.6 percent, a level not seen in more than eight years and nearly 4 points higher than just a year ago, according to Grubb & Ellis Co.
A big part of the problem? Overdevelopment.
“The overexuberance of capital coming into the Inland Empire promoted overzealous development with the anticipation that the explosive absorption would never cease,” according to Bill Heim, executive vice president of Lee & Associates.
Also contributing to the high vacancies are companies, especially those in the consumer goods industry, that are consolidating several facilities. And those are the lucky ones.
“Take furniture, for example. You’ve lost Levitz, you’ve lost Wickes,” said Heim. “Those are companies that occupied millions of square feet of warehouse space. They’re no longer in business. It’s directly consumer related.”
The market is far from being at a standstill, however. Net absorption was up by more than 3 million square feet to 3.95 million in the third quarter, thanks mostly to activity in the Redlands-San Bernardino submarket, which saw 3.15 million square feet of positive absorption. Asking rents have remained at $0.42 for the last few quarters.
One bright industrial submarket, said Heim, is the western market of Chino, which saw vacancies drop by nearly a half-point to 2.4 percent, close to the L.A. County average. The submarket also boasted some of the highest rents in the Inland Empire, $0.49 per square foot, 7 cents higher than the market’s average.
The office market is faring worse after years of filling space with mortgage companies, banks and finance-related tenants. Vacancies climbed more than 2 points to 19.9 percent last quarter, nearly double the rate from the same period a year ago. Asking rents remained at $2.19.
MAIN EVENTS
– Toy company MGA Entertainment Inc. inked an eight-year lease for 749,309 square feet of space at 1651 California St. at the AMB Redlands Distribution Center in Redlands. The manufacturer of Bratz Dolls plans to vacate a Rialto building and move warehouse operations to the facility. The deal is worth $22.2 million.
– The Oakmont Industrial Group sold a 31,768-square-foot industrial distribution facility in Riverside to Qualis International Inc. The packaging supplies company paid $3.1 million for the 1120 Citrus St. property in the Hunter Park Business Center.
– A private investor sold a 14,225-square-foot warehouse building in Chino to fastener distributor Pacific Warehouse Sales for $2.32 million. The building is part of the El Prado Business Park.
– Otto Instrument Service, an aircraft instrumentation and accessories repair company, bought a 13,959-square-foot warehouse building at 1471 Valencia Place in Ontario for $2.7 million. Private investors sold the property.
– An individual investor sold a 13,856-square-foot industrial building in Rancho Cucamonga to Antoyan Allen and T Family Trust for $1.9 million. The buyer plans to lease out the three-year-old property located at 9435 Charles Smith Ave.
– A private trust purchased a warehouse at 120 N. Joy St. in Corona for $1.5 million. The seller of the 12,255-square-foot building was a private trust.
Industrial Market At a Glance
Inventory: 419 million square feet
Under Construction: 12.7 million square feet
Asking Rents: 42 cents
