Sales, Lease Deals Show Strong Demand for Warehouse Space
By MARGOT CARMICHAEL LESTER
Contributing Reporter
The Inland Empire industrial market remains robust at the year’s midpoint, with sales and leasing activity increasing to 8.2 million square feet in the second quarter from 6.3 million square feet in the previous three months, according to Grubb & Ellis Co.
Vacancy rates held steady at 7.3 percent in the second quarter, though market-wide asking rents slipped in the period to 35 cents per foot, exclusive of taxes, insurance and utilities from 39 cents in the prior quarter.
Demand for rental industrial space remains high in the region, in part because of its proximity to seaports and ground transportation hubs, said Mary Sullivan, client services manager for Grubb & Ellis. Another factor could be dwindling supply.
That’s a greater factor in San Bernardino County, where Grubb & Ellis reported only 29,000 square feet under construction in the second quarter. San Bernardino rents are in the 33 cents-per-foot range, while on the Riverside County side nearly 2.7 million square feet was in development, with asking rents in the 40-cent range.
Keeping up with the demand isn’t a matter of finding land on which to build, but overcoming opposition from neighboring communities. In Mira Loma, proposed projects have come under fire, threatening to reduce available square footage significantly.
Citizens’ groups oppose a proposed 1,290-acre industrial center adjacent to the March Air Force base. Opponents say the project will increase heavy-truck traffic and pollution. Boosters say it will create nearly 15,000 jobs.
One project under way is Pacific Newport Properties’ 565,968-square-foot warehouse. Begun in the second quarter, it is slated to go online in early 2004. Another project, by Industrial Development International, received approval for a two-building warehouse/distribution facility totaling 1.6 million square feet.
Two significant lease deals were recorded in Ontario. In a transaction valued at $19 million, Acuity Lighting leased 434,555 square feet that enabled the company to consolidate several locations into the new space. Home Depot Inc. took 450,000 square feet for an undisclosed amount.
Elsewhere, Wickes Ltd. inked a 60-month, 572,927-squre-foot lease valued at $9 million at 9339 Hermosa Ave. in Rancho Cucamonga and Levitz Furniture Co. signed a 460,000-square-foot lease at 11640 Harrel St. in Mira Loma for nearly $9 million over 60 months.
In Fontana, Catellus Development Corp. is building a 616,000-square-foot warehouse at the Kaiser Commerce Center that is scheduled to go online next year. Ontario will be home to Belmont Business Park, a $10 million industrial park designed for small owner-users near the Ontario airport.
Industrial investment activity continued to be brisk in the second quarter.
Major investments included Bay West Equities’ acquisition of the 19.3-acre Cooley Ranch Industrial Park in Colton from GSIC Investments for $17.2 million.
In Fontana. Fiesta Mexican Markets purchased an 80,000-square-foot warehouse at 10550 Business Drive for $4.3 million. At Empire Center, Irvine-based Diversified Partners picked up the $14.8 million Palm Court promotional shopping center and Oakland-based Kaiser Foundation Health Plan purchased a $1.7 million stand-alone building.
On the office front, Sullivan said, vacancy rates fell to 10.3 percent in the second quarter, down from 13.7 percent in the previous three months. Class-A space looks even better, coming in at 8 percent vacancy. “That’s the lowest in recent history, if not the lowest period,” he said.
One lease of note was General Motors’ deal for 14,802 square feet of Class-B space for five years for $1.5 million at 11276 Fifth St. in Rancho Cucamonga.
Healthy vacancy rates, steady rents and rising absorption figures along with access to a professional workforce fueled the speculative development of the Campus at Rancho Oaks in Rancho Cucamonga. The master-planned park will contain 14 office buildings ranging from 2,500 to 8,000 square feet and should be complete in late 2004.
