Inland Empire Industrial Vacancies Tick Upward in Q2

Direct vacancy in the Inland Empire industrial market ticked upward 20 basis points to 2.9% in the second quarter of 2023, Kidder Mathews reported. On a quarterly basis, the uptick is considerably smaller than the 120-bp increase the sector experienced between Q4 2022 and Q1 of this year.

Demand is softening “due to reduced consumer spending and sluggish international trade at the ports,” reported Kidder Mathews. The delayed disruption caused by labor contract conflicts in West Coast ports in June resulted in container backlogs and prolonged wait times, and as a result, some shippers chose to offload in East Coast ports.” Although deal flow has slowed this year, a few significant transactions have increased volume, the firm said.

“Through 2023, the Inland Empire industrial market is expected to experience an increase in vacant property as released construction projects come to completion,” according to Kidder Mathews. “There will then be a period of decline as the new supply is absorbed and the pace of development comes to typical levels. Supply growth will generate further upward pressure on vacancy at least through the end of the year, as the under-construction inventory is pre-leasing at a slower rate.”