The Inland Empire’s industrial vacancy rate is predicted to rise gradually as a result of the recent economic adjustment; this is illustrated by the 8.4% overall vacancy rate, which represents a noteworthy 350 basis point increase from the previous year.
MARKET DRIVERS
The Inland Empire’s industrial market remains competitive as a wave of newly developed properties enters the market. Though building deliveries have advantages, the significant disruption that third-party logistics providers cause to the distribution system makes it challenging for the trailing market to entirely embrace them. Last year, U.S. companies reduced their inventory, while labor disputes and personnel shortages hindered imports into ports in Southern California.
The market is still active due to the continued demand for industrial space, especially for warehousing and distribution centers. However, business inventory is increasing and consumer spending is beginning to rebound, which is bringing more commodities to the nearby ports of Long Beach and Los Angeles.
Asking prices are declining in part because of an abundance of sublease space that is being adversely affected by market closures of distribution centers and is available at a reduced rate, together with an abundance of vacancies. The pressures of inflation and persistent supply chain difficulties may intensify this tendency. Higher concessions have led to an increase in effective rental rates, which have varied depending on location, size, and old. Overall, the rental market in the Inland Empire’s western region has experienced steady and continuous growth.
NEAR-TERM OUTLOOK
Economic factors including interest rates, inflation, and overall economic conditions will affect the industrial market. By early 2025, the number of available positions may decrease once again as the development pipeline empties and net absorption reaches previous levels. When labor agreements involving West Coast port workers were concluded, imports have historically grown to their greatest levels. A notable rebound is anticipated for the second part of the year; however, it could take some time for tenants and owners to restore confidence in the stability of the market. Credit restrictions have made cash buyers and 1031 exchange requirements increasingly crucial to spending decisions.
Click here to subscribe to Kidder Mathews market research.