Equilibrium is a word being used a lot to describe the industrial market in the Inland Empire these days, as supply and demand seem to have struck a healthy balance.
The second quarter brought further growth, with industrial vacancy rates falling to 10.6 percent from 12 percent in the previous quarter, according to Cushman & Wakefield Inc.
The drop came as production and distribution companies continued flocking to an area that encompasses Ontario, Rancho Cucamonga, Riverside and San Bernardino.
A total of 4.3 million square feet of industrial space was leased or sold in the second quarter. That space remained relatively inexpensive, with average lease rates jumping slightly to 33 cents in the second quarter from 31 cents in the first.
To keep up with demand, developers now have 14 million square feet of space under construction, including 7 million square feet of speculative space.
“It remains to be seen if we can maintain this cycle of equilibrium,” said Mary Sullivan, client services manager at Grubb & Ellis Co. “But no one’s saying we’re overbuilding.”
Much of the construction is due to be completed later this year or during the early part of 2000. After that, the amount of space scheduled to come online falls off until the fall of 2000, suggesting that rents could rise mid-year if supply starts to lag.
“If your building is under construction now or about to be completed, you should be in great shape in the fourth quarter of the year and the first quarter of next,” said Chuck Belden, a broker at Cushman & Wakefield. “Does that translate into increased rent? One would think so, but that would be contrary to the region’s history.”
In major second-quarter transactions, Wal-Mart Stores Inc. leased about 400,000 square feet at Park Mira Loma West, and another 535,000 square feet at the Mira Loma Distribution Center.
Meanwhile, the city of Riverside has approved plans for an Orange County developer to build about 1 million square feet for a warehouser who does distribution for Wal-Mart.
In the Inland Empire West submarket, ground was broken for the $55 million Haven Gateway Centre in Ontario. Investment Development Services started construction of three of the six buildings planned as part of the project, which will total 1.5 million square feet.
Also in Ontario, World Bazaar signed a 10-year lease for 725,000 square feet, and Ontario-based beverage company Biagi signed a 10-year lease for 290,000 square feet for $10.1 million.
Just before the end of the quarter, Catellus Development Corp. signed Gillette Co. and GATX Corp. to build-to-suit projects. Gillette agreed to lease 357,000 square feet, with an option to expand to 512,000 square feet, while GATX, a transportation services company, agreed to lease more than 440,000 square feet.
Construction is scheduled to start in the fall on those buildings near Ontario.
In the much smaller Inland Empire office market, the vacancy rate decreased slightly to 22.2 percent in the second quarter from 23.8 percent in the first.
“Absorption is increasing modestly, office building sales are increasing modestly, lease rates are increasing by 5 to 8 percent and sale prices are staying about the same,” said Mano Leventakis, senior vice president at Grubb and Ellis. “Speculative construction is underway in Ontario and San Bernardino, while build-to-suit activity has (also) picked up.”
Construction began on a 25,514-square-foot office building near San Bernardino’s Hospitality Lane business district, just east of the newly opened National University.
In Rancho Cucamonga, Aetna U.S. Healthcare leased 33,000 square feet at Legacy Partners’ Empire Lakes Corporate Center, with an option to expand.
Southern California Edison also signed a lease to move its customer-service telephone operations to Empire Lake, which will involve relocating 575 employees to the new 87,000-square-foot site.
Meanwhile, Cuna Mutual Group and Allied Products Corp. both signed letters of intent to move into Empire Lakes as well. The firms leased 65,000 square feet and 20,000 square feet, respectively.
Major Deals:
? Wal-Mart Stores Inc. leased about 400,000 square feet at Park Mira Loma West, and another 535,000 square feet at the Mira Loma Distribution Center.
? In Ontario, World Bazaar signed a 10-year lease for 725,000 square feet.
? Construction began on a 25,514-square-foot office building near San Bernardino’s Hospitality Lane business district, just east of the newly opened National University.
? In Rancho Cucamonga, Aetna U.S. Healthcare leased 33,000 square feet at Legacy Partners’ Empire Lakes Corporate Center, with an option to expand.
? Southern California Edison signed a lease to move its customer service telephone operations to an 87,000-square-foot site at Empire Lake.
