Appetite for industrial space in the Inland Empire continues unabated as Q3 was the region’s 37th consecutive positive quarter for net absorption, according to a report from Kidder Mathews, supported by CoStar Data.
The report says that while nearly 18.3 million square feet of industrial space has been completed and delivered to the market year to date, an additional 21 million square feet of industrial space remains under construction. Yet, despite this high level of development activity, net absorption in on par with occupier demand; consequently, there are very few concerns about overdevelopment.
Also, the report says that notwithstanding the potential headwind of recently begun trade wars, with the national economy continuing to grow, unemployment rates at historic lows, and U.S. consumer confidence high, very little to no slowdown in the Inland Empire industrial market is expected for the foreseeable future.
JLL reports that industrial construction activity increased in the Inland Empire in the third quarter, and there is now over 28 million square feet of warehouse and distribution space currently under construction in the market. The firm adds that tenant demand remained strong through Q3 and is paced to surpass 2017 net absorption total.
JLL’s report also reiterates, as SoCal Real Estate recently reported, that while warehouse employee wage growth has been moderate in coastal markets, it remains stagnant in Inland Empire.
According to Kidder Mathews, the Inland Empire is now one of the leading economies in California as e-commerce continues to thrive. “Eclipsing other regions of Southern California with its stellar employment growth rate, the IE’s economy is slated to expand throughout 2018,” the report says. “With job growth concentrated in the retail and services sector, particularly the logistics industry, the Inland Empire witnessed a 1.3 percent year-over-year drop in its unemployment rate in Q3 — one of the largest in the state.”
Historically, the Inland Empire’s unemployment rate has always been significantly higher than either L.A County’s or California’s, says Kidder Mathews, but years of employment growth has effectively narrowed the gap, changing the region into one of California’s most vital economies. In fact, the IE’s current 4.6 percent unemployment rate is now below L.A. County’s (5.1 and), and 30 basis points above the state’s (4.3 percent).
The report also says during Q3, notable industrial leases in the region included Hanes Brands Inc.’s 1,309,710-square-foot lease at 700 Indian Ave. in Perris; Nordstrom Inc.’s 1,009,092-square-foot lease at 490 Columbia Avenue in Riverside; and Ross Stores’ (DMSI) 739,903-square-foot lease at 24103 San Michele Road in Moreno Valley.