The Inland Empire felt the effects of its industrial building boom last quarter when more than 26 million square feet of warehouse and distribution space planned long before the current economic downturn came on line.
With a slowdown in retail sales and Los Angeles port traffic, there was light demand for the space, driving vacancy rates up nearly two points to 6.5 percent, the highest rate in nearly four years, according to Grubb & Ellis Co.
Despite the new inventory, sale and lease activity fell to 3.5 million square feet in the January-March period, from 6.8 million square feet during the fourth quarter of 2007. The net absorption rate toppled by 50 percent to 2.6 million square feet.
Asking rents managed to stay put, ending the first quarter at 43 cents, a couple of cents higher than the same period a year ago, proving that the area still remains desirable for corporations looking for a Southern California distribution hub.
As always, vacancy rates varied wildly between submarkets. The western Rancho Cucamonga submarket was one of the few areas in the Inland Empire to see vacancies fall slightly, landing at 2.3 percent.
Though many in the industry have been touting the growing popularity of the easterly submarkets, the eastern region still has some of the Inland Empire's highest vacancies and lowest rents. Redlands-San Bernardino, for example, saw its vacancies shoot up nearly four points to 17.4 percent during the first quarter, while its rents fell a penny to 38 cents.
"I just think we're seeing a slowdown as it relates to port activity and that's affecting the east far more than the west," said Sam Foster, executive vice president of Jones Lang LaSalle Americas. "It's inefficient to be east of the I-15."
Eastern submarkets can be enticing, though, to large-scale users. Foster noted a deal he worked on last year in which Whirlpool leased a whopping 1.7 million square feet in Perris. "You just don't get an 80-acre rectangular lot in Ontario or Mira Loma or Chino," he said.
Industrial Market At a Glance
Inventory: 406 million square feet
Under Construction: 22 million square feet
Asking Rents: 43 cents
- Young Electric Sign Co. bought a 100,588-square-foot industrial building at 5405 Industrial Parkway in San Bernardino for $8.48 million, about $84 per square foot.
- Erin Madison Development sold a 17,712-square-foot industrial property at 1060 E. Ontario Blvd. in Ontario to individual investors for $3.19 million, about $180 per square foot. The 2007 building is part of the Big Yards Business Park.
- CB Richard Ellis Investors acquired 66 acres of raw land in Fontana from a private trust for $40 million, more than $600,000 per acre. The property includes four parcels that front Jurupa Avenue. CBRE Investors plans to partner with Phelan Development to construct three industrial buildings on the property totaling 1.2 million square feet.
- The Michael Wolfe Trust and Launchbaugh Family Trust bought a 17,840-square-foot industrial building at 1148 California Ave. in Corona for just over $2.1 million. Bell Financial Services LLC sold the property.
- Union Bank of California sold a 6,556-square-foot retail building at 12252 Perris Blvd. in Moreno Valley for $1.75 million to a private Orange County investor.
- A private investor based in Los Angeles bought a 6,800-square-foot retail building at 1333 E. Foothill Blvd. in Upland for $2.14 million from another private investor.
- Redhawk Commercial Park LLC sold a 6,332-square-foot office building at 32819 Highway 79 in Temecula for $1.2 million. The Secunda Alfred Living Trust purchased the two-story office building, which was built in 2004.
- Logistics and transportation services firm ODW Logistics Inc. signed a long-term lease to occupy the 300,000-square-foot Building 30 in the Majestic Spectrum business park. Building 30 is located at 13725-13835 Pipeline Ave. in Chino and is owned by developer Majestic Realty Co. Financial terms of the deal were not disclosed.
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