Inland Market Presents a Challenge

INLAND EMPIRE-The Inland Empire office market has led a charmed life in recent years, growing in size along with the economy and building much more class A space as white-collar jobs moved into the region from elsewhere in Southern California. Even during the last economic downturn, the region’s office market has fared better than most because it posted job growth, helping to keep the office market healthy while many parts of the nation lost jobs.

The latest downturn is a different story, however. Grubb & Ellis Co. points out in its latest report on the region that “an attempt to assess the market’s true vitality is tricky” in light of the impact of job losses in housing-related businesses, which are big users of office space. In addition, the Inland Empire has been one of the hardest-hit regions in California in terms of foreclosures.

On the positive side, Grubb & Ellis researchers report the Inland Empire [Riverside and San Bernardino counties] performed well in 2007, with absorption and construction levels that nearly matched those of 2006. But the amount of sublease space on the market doubled on a quarter-to-quarter basis in the last two quarters as housing-related firms either pulled out of their spaces or downsized and placed some of the excess on the market.