The Inland Empire office market is not only continuing to recover but occupied space is now above pre-pandemic levels, according to the latest report from NAI Capital.
Particularly, there has been positive movement on the occupancy front. While total vacancies ticked up by 20 basis points in the fourth quarter from the previous three months, the category dipped by 260,015 square feet versus the 12 months prior. The category ticked up on a quarterly basis due to 80,119 square feet of direct office space entering the Inland Empire. That said, vacant sublease space actually saw an 8.6 percent decline in the fourth quarter and a 30.8 percent plunge year-over-year.
"The stabilization of office vacancies has been supported by evolving remote work trends and shifting space utilization strategies," NAI wrote.
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"Since the economy reopened at year-end 2020, direct vacant office space has decreased by 810,188 square feet, while occupied office space has grown, surpassing pre-pandemic levels by nearly 1.4 million square feet."
Also, vacant sublease space is down 60.8 percent compared with pre-pandemic levels. Those looking to sublease space are now facing limited options, which makes it less likely landlords in that category will lower rents, according to NAI.
Rents increased 1.8 percent in 2024 to $2.32 per square foot full-service gross.
Additionally, there was an appetite for office transactions in the Inland Empire. Leases surged by 35.3 percent in 2024 despite slowing down in the last three months of the year. Also, sales per square footage leaped by 30.7 percent. The average sales price inched up to $229 per square foot, up 1.4 percent.
"The rise in sales volume and average building size signals a market in transition, with investors refining acquisition criteria and viewing conditions as favorable for both buying and selling," NAI said while adding that investor confidence is improving even as interest rates remain high.
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