The Inland Empire’s industrial market continued its red hot pace in the first quarter, but it was the region’s rapidly growing office market that raised eyebrows.

A frenzy of office building continued through the January-March period with nearly 1.9 million square feet of space under construction at the end of the quarter. That included 541,834 square feet in the Riverside area, which already had the largest amount of rentable space in the region with 5.7 million square feet.

If developers stay on schedule, one million square feet of office space will come online this quarter in the Inland Empire. Even with the additional space, it’s expected that asking rents will increase as absorption continues to exceed production.

“I’m astounded by the numbers, to be honest,” said Grubb & Ellis Co. Senior Vice President John Ewart. “For years (the office market) lagged way behind the industrial. We were always chasing a few hundred thousand feet a year. Now these buildings are leased before getting certificates of occupancy.”

The heated market was already being reflected in asking rents, which nosed upward last quarter amid the area’s growing popularity as a location for newer and more affordable office space.

The average Class-A asking rents increased by 4 cents, to $1.88 per square foot compared with the prior quarter, while the Class-B average asking rents climbed six cents to $1.60, according to Grubb & Ellis.

Net absorption also climbed last quarter, with 600,000 square feet of office space occupied by the market. The Ontario International Airport submarket accounted for nearly half that space, with a net absorption of more than 286,000 square feet.

Transcam Development LLC signed up its first tenant for its new 740,000-square-foot Canyon Crossing Corporate Center office park in Riverside.

Chapman University took 5,000 square feet for 10 years. Terms of the lease were not disclosed.

Particularly hot was the South County submarket, which includes Temecula and Murrieta and has been drawing companies relocating from the pricier San Diego area.

That was driving up rents significantly higher than the overall Inland Empire average, with a square foot leasing for $2.35, up more than 10 percent from the prior quarter. The area’s vacancy rate has also dropped by nearly half over the last year, to 4.5 percent last quarter.

“Those in the San Diego market are being pushed out because of real estate costs right now and they’re being pushed north,” Ewart said.

The Inland Empire’s industrial market also continued its hot pace last quarter. After hovering around 4.4 percent for the last half of 2004, the vacancy rate fell to 3.6 percent in the January-March period, with nearly every submarket following the trend.

The most dramatic drop in industrial vacancy took place in the Colton/Rialto region.

That rate had spiked because developer Prologis completed a 882,000-square-foot structure at its Prologis Park I-210, but it was able to lease the structure to Solo Cup Co., a maker of disposable foodservice products. The 10-year lease was for a total consideration of $18 million.

Prologis is completing the third and final building at the park, a 1.2-million-square foot structure. “There’s an insatiable appetite for buildings 400,000 square feet (and larger), and there’s less and less land to build facilities of that size on,” said Mike McCrary, senior vice president, Colliers Seeley.

Other submarkets within the Inland Empire, such as Chino and Ontario/Mira Loma, continue to be more desirable thanks to location and existing infrastructure, but a lack of supply has driven activity to other submarkets. The Moreno Valley/Perris region’s vacancy rate fell to 0.3 percent.

“With the absence of available industrial-zoned land you find that people are forced to look down at the Moreno Valley,” said Mike McCrary, senior vice president of Colliers Seeley International.