Kurt Strasmann is a executive managing director at CBRE.
The Inland Empire led the US in industrial warehouse leasing activity for another year. In 2018, tenants in the Inland Empire signed 20 of the top 100 industrial leases in the US, totaling 18.98 million square feet in industrial space, according to a report from CBRE. Warehouse leasing activity in the Inland Empire nearly doubled the number-two market, the Pennsylvania I-78/81 corridor. The Pennsylvania industrial market had 11 of the top deals, totaling 11.8 million square feet.
“The Inland Empire market is as active as any time that I can remember, and that is a really great sign. It really speaks to the emergence of e-commerce,” Kurt Strasmann, executive managing director at CBRE, tells GlobeSt.com. “There has been a tremendous amount of industrial building in the Inland Empire, and you have seen buildings slowing edging up from 500 square feet to 700 square feet and now to more than a 1 million square feet. There has been a tremendous amount of development in that size range.”
There is no doubt that ecommerce drove the leasing activity throughout the country, and the Inland Empire's prime location near the two largest ports in the country and with access to Southern California's population centers makes the market a perfect location for ecommerce users. However, the Inland Empire also have the quality class-A product that these users need and it has the land to develop more space. “The product is state-of-the-art. You have to go where the product is at, and the Inland Empire is at the forefront of development. And, it has been for the last four or five years. That is specific to the Inland Empire,” says Strasmann. “In the infill markets, you cannot find 100 or 200 acres.”
Despite the strong performance, there is some talk among industry professionals that the construction activity may be surpassing demand. However, Strasmann says the first two months have told a different story. “I have heard that there are certain markets that are fragmented in certain size ranges,” he says. “Late last year, there was a feeling that was happening. It is too soon to see if that is really happening, but in the last 60 days, leasing activity has been strong across the board.”
While the CBRE report tracks the largest industrial deals in the country, the Inland Empire was a top market for industrial leasing across size ranges. In fact, rent growth has been strongest for mid-box assets, less than 200,000 square feet. “It is not only big buildings, but it is small and mid-sized buildings as well,” says Strasmann. “The size range of 200,00 square feet and under had some of the strongest rental appreciation in the basin. In my opinion, it is a broad-based growth throughout the market.”
This year, expect more of the same from the Inland Empire market across all boxes. “I think that 2019 will be a repeat of 2018,” adds Strasmann. “Right now, leasing is very active and demand is exceeding supply in every market.”
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