Small Industrial Goes Big in Inland Empire (Pt. 2)

By Dennis Kaiser

Connect Media takes a deep dive into the Inland Empire CRE market with CBRE senior industrial analyst Jamil Harkness. His insights into the small industrial market sector reveal a number of interesting trends and opportunities. Here is the second in a series of Q&A’s with Harkness, the first part can be found here, Q&A 1.

Q: Which markets are outperforming the rest, and which are under-performing?

A: The small industrial market in the Inland Empire West continues to outperform the Inland Empire East due to the amount of big-box industrial users in the submarket. The larger presence of big-box users in the Inland Empire West has contributed immensely to the surge in activity for small industrial product, as well, as many of these smaller users service the big-box industrial users in some capacity. Since 2015, gross activity in the small industrial market totals more than 14.9 million square feet, with the Inland Empire West accounting for 64% of the activity. As big-box industrial users continue to gravitate to the East, activity in the small industrial market will grow in accordance.

 Q: How does the tenant base in the last cycle differ from the tenant base in the current cycle?

A: During the previous cycle, the tenant base was centered around home construction as there was rapid growth in the investment of residential developments. In the current cycle, the tenant base is centered around e-commerce support. With proximity to the ports and the presence of numerous e-commerce giants throughout the Inland Empire region, small users are now supporting this activity to a large degree, ranging from packaging to logistics users. For example, third party logistics (3PL’s) activity has steadily increased, almost going unnoticed due to the emergence of major e-commerce players.

Q: What is the key fundamental difference between the Inland Empire East and Inland Empire West?

A: The small industrial market at the grassroots level is driven by private funds from local entrepreneurs in the area, which is a key differentiating factor when comparing innate market fundamentals in the East and West. Proximity to a strong affluent entrepreneurial demographic translates to more private funds for industrial activity and development. For example, Ontario and Rancho Cucamonga are cities in the Inland Empire West that have strong affluent entrepreneurial demographics, helping support the sizeable small building industrial base. Conversely, cities in the East, outside of Riverside, Corona and Redlands, lack a strong affluent private entrepreneurial demographic conducive for supporting a large thriving small industrial market.

CBRE’s Harkness

For comments, questions or concerns, please contact Dennis Kaiser