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September 28, 2016

Inland industrial real estate has nearly doubled since 2000

The Press Enterprise

Richard K. De Atley

Millions of square feet are newly available or under construction as rents rise

The industrial real estate market for the Inland area continued growing in the third quarter of 2016, with vacancy low and rents rising due to a lack of available space, especially right-sized facilities for smaller concerns, a real estate analyst said.
The amount of available space has decreased by 18.8 percent in the past year, despite delivery of millions of new square feet during that time.
The average asking rate for a bare-bones rent was 51 cents per square foot, up 2 cents from the previous quarter and nearly 11 percent from the previous year, said Jerry Holdner, director of research for Kidder Mathews.
The Inland-area industrial market has almost doubled in size from 265 million square feet in 2000 to 513.3 million square feet today, Holdner said.
Net absorption, which takes into account vacated and newly constructed available space as well as occupancy at the beginning of the quarter, grew 6.3 million square feet in the third quarter. It was the 16th straight quarter of positive absorption, for a total of 76.7 million square feet.
During the third quarter, 6.6 million feet of new space was delivered and the total for the year so far is at 16.2 million square feet.
Currently there is 14.5 million square feet under construction, with most of the facilities over 500,000 square feet.
Leasing activity should rise as the new space becomes available, Holdner said.
"It's a great time to be a landlord or a seller," he said in his study statement.
Among the new commercial distribution centers opening during the third quarter for the Inland area was the million-square-foot QVC West Coast distribution center, on Aug. 31.
Amazon has fulfillment operations in Moreno Valley, Redlands and Rialto, with two in San Bernardino. Another fulfillment center in was announced in May for Eastvale.
The Inland industrial vacancy level, while low, rose slightly to 5.4 percent in the third quarter compared to 5.1 percent the previous quarter, Holdner said, but that was mostly because "more product was delivered than occupied" during the time period.
The unoccupied space was at 27.8 million square feet, against 25.2 million for the third quarter of 2015, "which is amazing considering that 31 million square feet of space was delivered during that time period," Holdner said in a statement.
Holdner said new construction includes some relatively smaller spaces, "which means spaces for smaller companies, or companies that are expanding. Which is good, because smaller companies can become bigger companies," he said in a telephone interview.
"The market is becoming increasingly robust as pricing continues to trend upward, while vacancies and availabilities remain at historically low levels," he said in a statement.

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