The report shows that average asking sales prices per square foot increased in the first quarter with the supply of buildings offered for sale remaining limited. The market upswing in actual sales prices started in 2014 in the East Valley, and sales prices are expected to show a steady upward trend in 2016. The first quarter decrease in actual sales prices is considered an anomaly, due to several low quality, older less-functional product trading in the marketplace. Asking sale prices on smaller product should continue to rise significantly, while on larger product they will rise, but at a slower pace.

Rent concessions continue to remain limited to older, less-functional product increasing effective rates. Both asking and actual GRS rates increased over the previous quarter. While both asking and actual NNN rates decreased slightly over the previous quarter, this is mainly due to the “TBD” phenomenon, where newer product which typically lease on a NNN basis is choosing not to publish asking rates and many larger NNN actual lease rates are remaining confidential. Rental rates are expected to trend upward in 2016, albeit at a slower pace than 2015 due to new construction, with many prospective tenants experiencing the “sticker shock” phenomenon, and choosing to renew existing leases, rather than move to a newer facility.

Four buildings completed construction in the East Valley in the first quarter, with 22 new buildings projected to be completed in the second quarter of 2016. New construction on both a build-to-suit and speculative basis will continue in the region for large, big-box type product. In addition, development interest has formulated into new construction on smaller product as well, as rental rates and sales prices now justify new construction. Further interest in redevelopment of obsolete or older sites is expected as industrial land become increasingly difficult to find.

RIVERSIDE, CA—According to a recently released industrial summary from the Riverside office of Lee & Associates that GlobeSt.com exclusively received, manufacturing/distribution buildings for the East Valley Market in Southern California's Inland Empire are lacking in inventory but have shown strong activity and gross absorption.

This trend continued on the heels of the great absorption performances in 2015 of 15.3 million square feet, 2014 of 11.4 million square feet and 2013 at 14.8 million square feet, the report says. Gross activity in the first quarter was just over 8.1 million square feet, with investment purchases and lease renewals accounting for 38% of the total. Demand for distribution buildings continues to keep pace with new supply as there are enough buyers and potential tenants in the market to absorb both existing space and new development. Absorption is expected to continue to be steady throughout 2016. First quarter 2016's absorption figures were just under 5.1 million square feet, compared to 3.2 million square feet during the same period last year.

Vacancy rates decreased in the first quarter to 4.9%. The remainder of 2016 is projected to show a stable vacancy rate, given continued demand and a projected moderate increase in new supply. Speculative development is becoming more prevalent, as demand continues and prices continue to rise, however due to the demand in the market, the impact on the vacancy rate is expected to be minimal.

“Momentum has slowed in the area of 'mega' buildings,” said Lee & Associates Riverside President David Illsley. “But users in the 100,000-500,000-square-foot range are still active, with many larger buildings are being offered as divisible to accommodate tenants in the mid-hundreds of thousands-square-foot ranges.”

The report shows that average asking sales prices per square foot increased in the first quarter with the supply of buildings offered for sale remaining limited. The market upswing in actual sales prices started in 2014 in the East Valley, and sales prices are expected to show a steady upward trend in 2016. The first quarter decrease in actual sales prices is considered an anomaly, due to several low quality, older less-functional product trading in the marketplace. Asking sale prices on smaller product should continue to rise significantly, while on larger product they will rise, but at a slower pace.

Rent concessions continue to remain limited to older, less-functional product increasing effective rates. Both asking and actual GRS rates increased over the previous quarter. While both asking and actual NNN rates decreased slightly over the previous quarter, this is mainly due to the “TBD” phenomenon, where newer product which typically lease on a NNN basis is choosing not to publish asking rates and many larger NNN actual lease rates are remaining confidential. Rental rates are expected to trend upward in 2016, albeit at a slower pace than 2015 due to new construction, with many prospective tenants experiencing the “sticker shock” phenomenon, and choosing to renew existing leases, rather than move to a newer facility.

Four buildings completed construction in the East Valley in the first quarter, with 22 new buildings projected to be completed in the second quarter of 2016. New construction on both a build-to-suit and speculative basis will continue in the region for large, big-box type product. In addition, development interest has formulated into new construction on smaller product as well, as rental rates and sales prices now justify new construction. Further interest in redevelopment of obsolete or older sites is expected as industrial land become increasingly difficult to find.