Inland Empire Retail Rents Up 13%
The Inland Empire has the fastest growing retail rents in Southern California, but retail rates are up throughout the region.
“The region is seeing a migration from West to East seeking relief from the high price of housing in Los Angeles and Orange Counties,” Lidia Talavera, EVP at NAI Capital Ontario, tells GlobeSt.com. The Inland Empire also ranked number seven among the top 10 highest-gaining metro areas. Average household incomes in the region are rising and are expected to increase, creating consumer demand for high-end retail. The yearend unemployment rate in the Inland Empire at 4% is the lowest in a decade. The demand for housing is also driving the demand retail in the Inland Empire.”
New retail construction activity is also up. Nearly 1.4 million square feet of new construction delivered in the market last year, including the 430,000-square-foot Renaissance Marketplace in Rialto, the 360,000-square-foot Page Plaza in Hemet and the 49,660-square-foot Gateway in Temecula. All of these properties are commanding higher rents. “These lifestyle-oriented destinations command top of the market rents, which contributed to the rise in average asking rent,” says Talavera. “Driving the demand for new construction in the Inland Empire’s retail market—and retail in general—is population and employment growth.”
It is no surprise that retail rent growth is concentrated around population centers, which are also seeing strong multifamily construction activity. That includes Riverside, Fontana and Rialto. “The Riverside submarket had about 1,500 units under construction and the Airport submarket around Fontana and Rialto had 1,305 units under construction at yearend,” says Talavera. “The average asking retail rent went up 3.3% from the prior quarter in the Airport submarket. The average asking rent increased 4.4% over the further quarter 2017 to $1.42 per square foot in the Riverside submarket. Asking rent grew 3.2% from the previous year to $1.59 per square foot in the South submarket. About 227,000 square feet of new inventory was added to the Airport submarket while the Riverside submarket received nearly 230,000 square feet of completed construction and the South submarket gained almost 223,000 square feet.”
Location has played a significant role in successful centers. All of the submarkets with the highest rent growth are located near multiple freeways. “It is no coincidence that these submarkets (Airport, Riverside, and South) are connected via the 10, 91 and 74 freeways along the path from Los Angeles and Orange Counties to the Inland Empire,” says Talavera. “The Riverside submarket posted the highest annual leasing volume at 830,684 square feet followed by the San Bernardino submarket at 667,370 square feet and the Airport submarket at 596,448 square feet. These submarkets represented 25%, 20%, and 18% of the market’s total annual leasing volume, respectively.”
In terms of which retailers are migrating to the market, discount retailers lead the activity, followed by grocers, fitness and restaurants. That fits pretty closely with national trends in retail leasing. “Value-based home goods chain At Home leased a 58,000 SF former Hobby Lobby space at Valley Gateway Plaza in Riverside as one of its first California stores,” says Talavera. “Asian foods supermarket chain 99 Ranch Market leased 56,185 SF in Chino to launch its new food hall concept, Cravings, in Chino. EOS Fitness leased 40,000 square of anchor space at Redlands Town Center in Redlands. Cracker Barrel leased 10,486 SF at the Renaissance Marketplace in Rialto and Norms Restaurant took down 6,500 square feet at the same destination.”