ONTARIO, CA-In the May/June issue of Real Estate Southern California , sources looked back at the growth of the Inland Empire over the past 10 years, from it’s rise from an obscure land of affordable housing and cheap dirt, to one of the fastest-growing economies in the US. And although, sources do not discount that fact the area as a whole has been hit hard by the recent recession across all product types, they did note that it is in a good position for a comeback.
“The pain is out there for everyone in the short run, but we have seen the last of new office building starts for a long, long time,” says Jack Hileman, principal of the Hileman Co. “The inventory and competition is fixed.”
Leventakis |
Hileman’s bet is hanging in there for a comeback. “Given that the very largest buildings in the Ontario area are only about 150,000 square feet each, it would only take one or two major relocations into this region and the world will suddenly change for everyone.” He continues that he would rather have an empty building in Ontario today versus an empty building in Orange County.
The rest of 2009 will be rough, Hileman expects, but the market should stabilize by the third to fourth quarter and starting next year, “we should be seeing the return to net new absorption. “The best, newest buildings with solid sponsorship should be well positioned to capture the major relocations,” he says. “With zero new product entering the pipeline for the foreseeable future, those with patience and wherewithal will do just fine.”
Olhasso |
Progressing through 2009 and the early quarters of 2010, the office, retail and industrial market will go through a market valuation correction, says Mano Leventakis, a senior vice president and managing director of Grubb & Ellis Co. “Sales activity will increase as a result of distressed owners, loan delinquencies and foreclosures,” he says. “And ultimately the gap between sellers and buyers will gradually narrow along with capitalization rates that will decompress.”
As the CMBS accounted for nearly half of all commercial lending in 2007, and limited financing options are available, Leventakis says cash will be king in 2009, therefore providing opportunities for pension funds, REITS and private investors. “Solving the national debt issue will be the number one catalyst to pump new life in the commercial real estate market.”
Walter |
Although firms are pulling back, they still realize that the region has competitive advantages over our coastal neighbors, explains Mary Jane Olhasso, economic development director of the City of Ontario. “In Ontario, both industrial and office lease rates are 30% cheaper than Los Angeles and Orange counties,” she says. “In the near term, as companies begin consolidating, they will do so in Ontario. Small enterprises and start-up companies will also take advantage of the region’s affordable real estate and resources from the local universities.”
Olhasso points out that Ontario has plans on the horizon. The Mayor and City Council have embarked on a General Plan Update called The Ontario Plan–a framework that “guides the City’s investment for the next 30 to 40 years and creates a ‘complete community’ where people and businesses want to come and stay.”
INDUSTRIALLeventakis says that the Inland Empire’s industrial market is well positioned for a comeback when the economy improves because of the area’s low-priced housing, ample workforce and desirable location for international shipping. “The developers and owners recognize the changing landscape of the economy and are adjusting rental rates and sale prices accordingly to preserve assets and attract lessees and buyers,” he says. “The Inland Empire is Southern California’s last stop for companies looking to establish massive distribution centers within reasonable proximity of one of the world’s busiest port systems, where more than 40% of all containerized cargo enters the US.”