GlobeSt.com Exclusive: Strong I.E. Activity, Despite Lack of Inventory
Strong I.E. Activity, Despite Lack of Inventory
By Natalie Dolce | Inland Empire
RIVERSIDE, CA—Even with a lack of inventory, the industrial market for manufacturing/distribution buildings for the East Valley Market in Southern California’s Inland Empire posted strong activity and gross absorption, bringing total absorption for the year to just under 15.3 million square feet. That was according to a recent Riverside report from Lee & Associates that GlobeSt.com got an exclusive sneak peek at.
The report says that the trend continued on the heels of the great absorption performances in 2014 of 11.4 million square feet and 2013 at 14 million square feet.
Gross activity in the fourth quarter was just over 7.3 million square feet, with investment purchases and lease renewals accounting for 33.5% of the total, the report says. Demand for distribution buildings continues to be “white hot” as there are more buyers and potential tenants in the market than available spaces. Absorption is expected to continue to be steady into 2016, tempered only by the lack of any available product. Fourth quarter 2015’s absorption figures were just under 4.9 million square feet.
Vacancy rates decreased in the fourth quarter to 5.09%, the report says. 2016 is projected to show a stable vacancy rate, given continued demand and a projected moderate increase in new supply.
“Speculative development is becoming more prevalent, as demand continues and prices continue to rise, however due to the demand in the market, the impact on vacancy rate is expected to be minimal,” says Lee & Associates Riverside president David Illsley.
The report shows that quality product is still extremely difficult to find and obsolescent buildings continue to be purchased for land value, and slated for demolition and development of new projects. Savvy tenants are acting quickly and understand that time is of the essence in transactions, realizing that there is little negotiating room and that clean deals will be completed first on available space.
Average asking sales prices per square foot remained steady in the fourth quarter with the supply of buildings offered for sale remaining limited. The market upswing in actual sales prices started in 2014 in the East Valley, and sales prices are expected to show a steady upward trend into 2016 due to the competitive marketplace and cap rate compression.
The fourth quarter summary, which was prepared by Caroline Payan, director of marketing and research of Lee’s Riverside office, found the base for the fourth quarter represented 10.3 million square feet under construction, with 93% of the total in the 200,000+ square-foot range, a 20% decrease over the previous quarter. Six buildings completed construction in the East Valley in the fourth quarter, with 13 new buildings projected to be completed in the first quarter of 2016.
Check back in the next day or so for more from the region, with details on how Temecula is faring.