Industrial Developers Head to Inland Empire East
The western side of the Inland Empire has been nearly built out, pushing developers into the eastern side of the market.
“It’s really the availability of land, and even more specifically, larger tracks of land that’s driving development demand in the Inland Empire East,” Patrick Wood, managing director at JLL, tells GlobeSt.com. “The Inland Empire West, which is now widely considered an in-fill market, has a very limited large developable sites left so in order to keep up with the demand of occupiers, developers must continue pushing east. But once you get into the smaller size segment, call it sub 10-acres, demand in the East is much softer as developers are much more specific about land they’re willing to acquire for development. That same sub-10-acre market in the IE West is absolutely on fire.”
Most of the development in the Inland Empire East market is in the big box size range, 300,000 square feet or bigger. “That doesn’t mean smaller projects are not also being developed,” adds Wood. “For instance, we are marketing for Operon Group a new development called the 210 Business Park in Rialto, which consists of three buildings ranging in size from 30,564 square feet to 69,068 square feet. The buildings won’t be completed until the end of 2019; nevertheless, activity has been very robust and I don’t expect any of the buildings will be available by the time construction is completed. The larger, big and mega-box developments are still targeting distribution and fulfillment related users, obviously a lot of that demand driven by the growth of ecommerce.”
Proximity to the ports is a top driver for new industrial development, the Inland Empire East has been viewed as being too far—but that is changing. “There will always be occupiers that for one reason or another don’t want to migrate to the Inland Empire East,” says Wood. “But the East is no longer a “pioneering market” as the business case has been proven by the countless number of Fortune 500 companies that have made that part of the market their home.”
With available land and strong demand for space, Wood expects construction in the market to continue well into the foreseeable future. “I think as quickly as developers can acquire and entitle land, the pipeline will remain healthy in the near term,” he says. “Even if tenant demand slows a bit, I would say it’s just a reversion back to the norm where some level downtime in marketing buildings should be expected. It shouldn’t mean that new development needs to come to a screeching halt.”