Inland Empire Expansion Ends in First Quarter

The Inland Empire expansion came to a halt in the first quarter, as a result of the coronavirus pandemic. According to data from UC Riverside School of Business Center for Economic Forecasting and Development, local GDP fell .2% in the first quarter with expectations that the second quarter will look far worse. The Inland Empire has seen consistent growth since early 2012.

Healthcare spending drove the decrease in GDP in the first quarter, both nationally and for the Inland Empire. In anticipation of a surge COVID-19 patients and limited capacity, hospitals across the county delayed many non-essential procedures. “Delaying procedures that were not COVID-19 related really had an impact in terms of the total GDP numbers, even though it was only two weeks. Healthcare is such a big part of the economy, the shift in the consumption really put a dent in the nation and in the Inland Empire,” Adam Fowler, director of research at the Center for Forecasting, tells GlobeSt.com.

This is unusual for a recession. Healthcare, as a standard, is typically unaffected by economic cycles—because people need healthcare regardless of the state of the economy. “Healthcare is so immune to normal business cycles, and it has made it difficult to compare this event to other downturns,” says Fowler. “This is unique in that it is a public health-driven downturn. The real economic variable is the virus and its transmission. In reality, so much of our service sector requires robust face-to-face interaction.”

The Inland Empire, like the rest of the country, will be impacted by this unprecedented event, but make no mistake: this is not 2008. The market is significantly different than it was at the onset of the financial crisis. “The backbone industries in the Inland Empire, like education, healthcare and various services are poised for a quick rebound. Some of that consumption will have to be stretched out,” says Fowler. “The pent-up demand that will be released when the health crisis is better under control will be of huge value to getting us back on track and into recovery, but it is going to be stretched out over a long period of time.”

The region’s biggest enterprise, of course, has been the logistics industry. All one would need is to look at Amazon’s stock performance to make the argument that industrial could actually benefit from stay-at-home orders, but Fowler isn’t as convinced. “Logistics and warehousing space is still working through a number of issues,” he says. “I do think that the area is well-positioned to take advantage of trends and shifts to ecommerce, which is exciting, but the nature of that is also going to look different.”

The Inland Empire became a national industrial hub, yes, because of its geographic proximity to Los Angeles and the ports, but also because of available land and development-friendly policy. That could change going into the recovery period. “The early growth was driven by available land and land-use regulations that allowed for that type of development,” says Fowler. “Those variables are harder to navigate at this point in time, and the low-hanging fruit doesn’t seem to be there.”