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California  + Inland Empire  + Office  | 

A New Face: Where the Growing Population Lives, Works and Plays

By Dennis Kaiser

Connect Inland Empire’s panel on the new face of the region explored the impact of population, employment and e-commerce growth on the commercial real estate market. Not only has the Inland Empire emerged as a well-connected region in which to live, work and play, its future prospects also remain bright.

The City of Moreno Valley’s Mike Lee noted that it is a “wonderful time to be in the Inland Empire,” because “all property types are running on all cylinders.” The growth in commercial real estate has translated into new jobs across the region. Lee says over the past five years he’s seen a shift from the ‘big bombers’ (large industrial facilities) to smaller project sizes, typically in the 200,000-square-foot range. That change typically is being driven by companies taking space in support of the bigger occupiers, like Amazon.

Marcus & Millichap’s Cody Cannon notes the Inland Empire offers the “greatest yield” for property types compared to other markets. He says, “The Inland Empire is the best market in California to invest in.” Because of the strong demand drivers and demographic shifts that have taken place, he believes the Inland Empire should also weather any potential downturn better than other markets. He points out the region has emerged as a place to work, live and play.

MGR Real Estate’s Mike Rademaker says a trend on the office side he is tracking involves tenants relocating from other SoCal markets to the Inland Empire. That could be because of a price squeeze or simply because companies want to be located near where their employees live. He cited an existing 20,000-square-foot tenant in one of its Inland Empire buildings that also had a 43,000-square-foot space in Irvine. The company elected to move its entire operations to Ontario to be closer to its employee base.

Rademaker notes office occupancy is high and rents are low. But if rents get into the $3-per-square-foot range, from $2.25 to $2.45, it could put pressure to build. He remains quietly optimistic that occupancy will hold up, but is starting to see some “underutilization in some spaces.”

Lee & Associates’ Tom Pierik points out that there is demand for office space in the region, yet there are very few office developments under way. He notes if a company wants to expand there’s no space for growth. A company with a 40,000-square-foot requirement may need to stay put in Los Angeles or Orange County for now. The last cycle the market got overbuilt, but due to stricter lender control, there hasn’t been office development and now there’s a “need for office development.”

Pierik says the first spec office development is under way in Corona. It is the first 100,000-square-foot-plus building and is being built at Dos Lagos. “We’re not far from the $3-per-square-foot rents we need to get,” he says. But development will require a “entrepreneurial spirit” to buy or build office.

Brookfield Residential’s Dave Bartlett says one way the face of the market has changed recently was new home building returned. He cited the Ontario Ranch master-planned community that has emerged on the scene over the past few years. It is now ranked No. 11 on the national list of Best Selling Communities, and is creating demand for a host of CRE development ranging from multifamily to retail. “This is a complete community that has come to life,” he says.

Affordability continues to draw people to the Inland Empire. “It has always been affordable out here in the Inland Empire, compared to Orange County and Los Angeles,” says Bartlett, who notes 50% of its customers are Millennials. He points out that demonstrates pent up demand, as they are seeing young people buying their first home, and in some cases their second. “That’s what’s different from before,” says Bartlett.

Related California’s Stan Smith says their development activity is focused on affordable or attainable housing that uses tax credits. He notes it is a “small segment” of the market, but yet an important one with sustained demand. He believes it is key to provide housing options for the service sector that fits between the low income Section 8 resident and those who can afford to pay market rate.

The affordable product Related California is building in the market is hard to tell apart from the market rate housing. But to achieve the quality level on affordable projects requires a city to help, typically in the form of tax credits. He points out the development process is longer and developers must navigate rising construction costs and the lack of subcontractors compared to the high demand for projects.

Pierik concluded by noting that the Inland Empire has reached 1.5 million jobs and is firmly entrenched as a freestanding economy. “It is not flashy or experiencing big growth but is steadier and consistent,” he said. “That’s better in the long term.”

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About Dennis Kaiser

Dennis Kaiser is Vice President of Content and Public Relations for Connect Commercial Real Estate. Dennis is a communications leader with more than 30 years of experience including as a journalist and in corporate and agency marketing communications roles. He is responsible for Connect’s client content operations and is involved in a range of initiatives ranging from content strategy, message development, copywriting, media relations, social media and content marketing services. In his most recent corporate communications roles, he led a regional public relations effort across Southern California for CBRE, played a key marketing role on JLL’s national retail team, and was responsible for directing the global public relations effort at ValleyCrest, the nation’s largest commercial landscape services company. In addition to his vast commercial real estate experience, Dennis has worked on communications and launch strategies for a number of residential projects such as Disney’s Celebration in Florida, Ritter Ranch in Palmdale California (7,200 homes, 22,000 acres), WaterColor in Florida and PremierGarage in Phoenix. Dennis’s agency background included firms such as Idea Hall and Macy + Associates. He has earned an outstanding reputation with organization leaders as a trusted advisor, strategic program implementer, consensus builder and exceptional collaborator. Dennis has developed and managed national communications programs for Fortune 500 companies to start-ups, both public and private. He’s successfully worked with journalists across the globe representing clients involved in major-breaking news stories, product launches, media tours, and company news announcements. Dennis has been involved in a host of charitable and community organizations including the American Cancer Society, Easter Seals, BoyScouts, Chrysalis Foundation, Freedom For Life, HOLA, L.A.’s BEST, Reach Out and Read, Super Bowl Host Committee, and Thunderbirds Charities.

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