From SoCal Real Estate’s December 2018 issue:
Excerpts from industry reports
IE Takes Top Spot for Warehouse Employment Gains
The Inland Empire took the number-one spot in the nation for boosting employment in the warehouse sector by 48.6 percent in the past five years, adding 41,300 jobs since 2013, according to a report from CBRE on finding labor for an expanding industrial and logistics sector.
In the report, Kurt Strasmann, executive managing director of CBRE’s Orange County and Inland Empire operations, as well as the firm’s Southern California functional industrial and logistics market leader, says, “The Greater Los Angeles region, especially certain submarkets such as the Inland Empire, has one of the best ratios in terms of labor supply and affordability as compared with similar metro areas up north or on the East Coast.”
Strasmann adds that the availability of affordable housing allows labor to live less expensively in the Inland Empire versus many other parts of the Greater L.A. area. “This, coupled with the exceptional economic and industry growth, will position the IE well into the future.”
Finding adequate qualified labor is a growing concern for the industrial sector nationwide. According to David Egan, CRE’s global head of industrial and logistics research, “Increasingly, development of e-commerce warehouses is contingent not only on proximity to large customer populations but also on finding increasingly scarce labor. Warehouse users will want to ensure that access to qualified labor is a priority in their considerations for expansion. Several markets, especially those with strong population growth, offer ideal conditions for staffing up distribution centers.”
CBRE came to its projection of demand for another 452,000 warehouse and distribution workers in 2018 and 2019 by applying a ratio of one employee per 1,000 square feet of e-commerce distribution space to its forecast for warehouse-construction completions in the US this year and next, the report says. That projected demand for 2018-19 exceeds the industry’s job growth since 2013 of 180,300 new positions a year, an acceleration that reflects the growing volume of e-commerce sales.
Marcus & Millichap’s 2H San Diego Self-Storage Market Report
Trade prices for self-storage assets on the West Coast are some of the highest in the country as the regional average sale price increased 6 percent over the past year, ending in June to $110 per square foot, reports David Shillington, president of Marcus & Millichap Capital Corporation in the firm’s self-storage market report for the second half of 2018. Over the same span, the regional average cap rate fell to the low-6 percent range from the mid-6 percent area.
The report says that the federal funds rate remains at 1.75 percent after the Federal Reserve raised rates 25 basis points in July. At that time, the Fed had indicated potentially two more rate hikes for this year, and as rates move up, lenders are tightening margins to compete for loans. Despite these efforts, borrowing costs are rising, which may prompt investors to seek greater returns in secondary markets.
The report also says that the capital markets environment remains competitive. “As the Fed stays committed to tightening policy, foreign central banks have yet to remove accommodation.”
Strong Retail Absorption in San Bernardino County
Retail continues to dominate the San Bernardino County landscape as job creation and new housing increase the region’s young population, according to a release from a representative of the County of San Bernardino. The release says that, according to CBRE, San Bernardino County posted 162,395 square feet of positive retail absorption in Q2 2018.
According to the release, there are many examples of new retail development in the County, including High Desert Gateway West, a 152,7000-square-foot shopping center by Lewis Retail, located in the city of Hesperia, which has recently added Starbucks, Dickey’s, Jimmy John’s Gourmet Sandwiches, and Fatburger; Renaissance Marketplace, a 60-acre shopping center in Rialto, developed by Lewis Retail, which has welcomed its first six tenants; and Montclair Place, owned by CIM Group, which has added more than 48,000 square feet of newly leased space following the announcement of the new 55,000-square-foot AMC Dine-In Theatre currently under construction.
In addition, Ontario Mills, owned by Simon Property Group, announced four new retailers, including sportswear powerhouse adidas, Japanese fashion brand MINISO, designer milkshake maker The Mug Shakes and interactive motion ride THE RiDE 7D.
The release also says that, according to CBRE, the County had $138.17 billion in total 2017 retail sales and is currently at record low unemployment.