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California  + Inland Empire  + Industrial  | 

New Report: I.E.’s Industrial CRE Market Continues to Surge

As the first quarter of 2022 comes to a close, and the headlines regarding industrial real estate deals in Southern California continue to pile up, Kidder Mathews has rounded up data for the Inland Empire – and the numbers don’t lie. (Full reports for O.C. and Inland Empire)

Competition for space remains robust, pushing rental rates to new all-time highs. Some highlights from Kidder Mathews’ market update include:

Market Highlights 

  • Direct vacancies remain at historical lows, concluding the quarter at 1.2% 
  • Direct asking lease rates increased to $1.08/SF on a triple net basis. 
  • Average sale price for industrial product was $277.37/SF in 1Q 2022. 
  • A staggering 32.5M SF is currently under construction. 

Market Drivers 

  • Lease rates continue to spike as tenants remain aggressive for the limited available space in the market. Direct asking lease rates concluded the first quarter at $1.08/SF, with IE West reaching an unprecedented rate of $1.29/SF.  
  • Direct vacancy levels remain at historical lows, concluding the quarter at 1.2%. Demand for newer state-of-the-art locations has never been higher as new construction projects are commonly pre-leased, and in some cases, negotiations have already begun on buildings that have not been entitled. 
  • The rise in ecommerce and a push for major retailers to hold more goods to compensate for any future supply disruptions, have increased the demand for big-box locations. Retailers continued expansion efforts with Home Depot and Best Buy leasing 1,099,629 SF and 501,649 SF, respectively.  
  • Construction deliveries picked up in 1Q 2022 with over 5.2M SF to help supplement the rise in demand. A staggering 32.5M SF remain under construction with over 4.0M SF of that going to Amazon’s multi-level project in Ontario. 

Near Term Outlook 

  • Limited availabilities sweeping the LA Basin will keep competition for space at high levels. Tenants who have looked towards migrating from neighboring Los Angeles and Orange County are in for a sticker shock as rentals rates will continue to spike. We can expect renewals to increase in the following quarters as options for relocations remain limited and available space quickly becomes leased a year in advance. 

Source: Costar, EDD, Ports of Los Angeles 

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