DCG Fulfillment, a third-party logistics provider, signed a 771,839-square-foot lease at 1300 California Street in Redlands, California, during Q2, one of the largest leases of the quarter in the IE market. | Courtesy a representative of Newmark Knight Frank

IE Sees Near 7 Percent Rise in Prime Logistics Rents

Carrie Rossenfeld Industrial

The Inland Empire (IE) ranked No. 12 (6.7 percent increase) on the top global logistics hubs registering the largest gains in prime logistics rents in the year ending March 31, according to a report from CBRE. The report also revealed that the IE is among the top five markets on the West Coast to experience a rise in prime logistics rents.

“The Inland Empire is experiencing a surge in container volumes from the ports, buoyed by consumer demand for adequate industrial product, coupled with a slowing supply of space,” says Dan de la Paz, EVP at CBRE’s Ontario, California, office. “Plus, land values continue to escalate rapidly and are expected to increase 20 percent and more within the next 12 months.”

As one of most active industrial markets in the nation, the IE is a key location benefiting from logistics advantages, extraordinary demand, and solid rental growth, CBRE reports. An ample amount of available land for future industrial developments makes the region perfect for big-box industrial development. Steady construction activity over the last four years resulted in significant growth in the industrial base, which positively impacted the local economy, adding thousands of jobs in the trade, transportation, and utilities sector.

CBRE also says solid demand for larger facilities in the IE East will spur deal velocity during the second half of the year due to rollover demand from users looking in the IE West. The strong occupancy gains over the last 36 months bode well for the rest of 2018 and are expected to boost the overall average asking lease by 1.4 percent, the company reports.

Meanwhile, in the office sector, CBRE says the IE posed a strong quarter of positive net absorption in Q2, which pushed vacancy to single digits. The IE East and IE West traded places in terms of quarterly net absorption compared with Q1 2018: Ontario led the IE West, which totaled 123,506 square feet of net absorption.

CBRE also reports that the IE economy strengthened during Q2, with new investment committed at Ontario Airport and new homes delivered in the Ontario Ranch master-planned community. Tenants may seek lower rents in the IE, but landlords are less willing to invest in product that appeals to companies seeking modern amenities, flexible workspace, and updated technology with significant inventory available. Existing office space has been steadily absorbed as government and medical tenants expand.