ONTARIO, CA-Demand for industrial buildings in the Inland Empire during the third quarter of 2013 continued to soar with sales and leasing activity reaching new highs with some 90 leases and 40 sales completed in the third quarter alone and the region recording its 16th consecutive quarters of both positive net absorption and declining vacancy rates. So says a recent Colliers International's third quarter report on the region's industrial real estate market.
Overall vacancy rates during the third quarter declined to 5.1% from the 5.6% recorded during the second quarter of 2013, the report noted, pushed downward by the region's soaring demand for large warehouse and distribution buildings, says the firm. Absorption rates during the latest three-month period remained slightly above those recorded in the second quarter standing at 3.56 million square feet.
“Industrial users are driven by increasing their efficiency and these newer, larger buildings allow them to do just that,” says Colliers executive managing director John Hollingsworth, who oversees the firm's industrial property operations in the Greater Los Angeles Region. “But even if vacancies tick upward, the demand is there to drive them right back down because spec product is almost non-existent, but, more importantly, there is a stunning lack of buildings that are most in demand—those that are a minimum of a half-million square feet or more in size.”
A lack of buildings in the 500,000-square-foot and above category pushed vacancies even lower in that classification, according to the Colliers report, recording a third quarter vacancy rate of just 4.4%, the report noted, one of the lowest rates for any type or size of building in the Inland Empire region.
“Demand for buildings in that size range is there, but construction has been slow to catch up with that demand,” Hollingsworth explains. “There is a pent-up need for these large, warehouse and distribution buildings, but the economic realities of the past few years have kept many major developers who are capable of constructing such large structures on the sidelines.”
And although there is a lot of construction underway, Hollingsworth anticipates tenant demand will quickly absorb much of it. “Although there is some speculative building underway, including the Empire Gateway project that we are marketing in Chino, developers are still taking a cautious approach to spec building and will be cautious until the economy shows a measure of sustained strength and when financing options improve.”
Non-premium average asking lease rates, meantime, rose minimally in the third quarter to 40 cents per square foot for triple-net users, increasing from 39 cents per square foot in the second quarter, but, the report cautioned, rates could see further increases in 2014.
“Those rates are only the average asking rates and do not reflect some of the asking rates we are seeing on newly completed projects,” Hollingsworth says. “Newer and more modern space that is beginning to come on the market can and does command a premium and does have substantially higher average asking lease rates.”
Continue Reading for Free
Register and gain access to:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
