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Red Hot Industrial Conditions Persist
Los Angeles is home to the nation’s busiest seaport complex and experienced the tightest vacancy rate in the country, which drove many tenants’ search for industrial space expansions or consolidations into the Inland Empire. Peak cargo volumes at SoCal seaports fueled demand for industrial space in 2018, and more of the same is expected this year.
Due to some uncertainty heading into 2019, developers and users in the Inland Empire rushed to complete deals and product deliveries by year-end 2018. This led to a record breaking 2018, but a slow – yet still healthy – start to 2019.
NKF reported market-wide vacancy remained under 5% for the 24th consecutive quarter, while rent set a new record high. Among the totable deals was Amazon pre-leasing 680,000 square feet in Fontana, in what will become the company’s 15th inland fulfillment center.
JLL reported Q1 leasing demand was up by 33% over the same period last year, propelled by large retail, e-commerce and logistics deals. Q1 average asking rents trended up at $0.63-per-square-foot, according to JLL.
Occupancy gains of 1.7 million square feet kept absorption positive for the 39th consecutive quarter, reported Cushman & Wakefield. The Inland Empire East submarket absorbed 2.1 million square feet of space. Although total retail sales growth is forecast to decelerate from 5.1% in 2018 to 4.4% in 2019, eCommerce sales are expected to grow 15.1% to $605.3 billion in 2019. Consequently, the need for warehousing and distribution space will only increase in the Inland Empire predicted Cushman & Wakefield.
NKF says new construction leasing once again drove net absorption gains: with roughly three million square feet of Q1’s absorption activity coming from new buildings constructed in 2010 or later. Notable move-ins included Rubbermaid (466,255 square feet in a Victorville expansion); DCG Logistics (405,504 square feet in Jurupa Valley); and Ryder Logistics (222,063 square feet in Perris).
JLL says big box projects continue to fill the construction pipeline, accounting for more than 61% of total volume under construction. The firm predicts the Inland Empire East submarket will capture the majority of market growth for the remainder of the year, even in the face of a market correction.
For comments, questions or concerns, please contact Dennis Kaiser
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