Category: Market News

Adverse market conditions have ultimately caught up to the Inland Empire Industrial Market. In just one quarter, availability is up 15%, vacancy jumped 24%, and Q3 had nearly half as many big-box (over 100,000 square feet) lease transactions then last quarter. Despite inevitable market corrections, the I.E. industrial sector seeks to sustain the incredible growth experienced the past few years from the increase in e-commerce activity and greater logistics requirements, factors that will most likely linger.

Development in the I.E. is reaching its apex. With an entire quarter to go, developers have already completed more construction in the Inland Empire year-to-date than at the end of both 2021 and 2022. As supply is stacking up, the amount of industrial square footage under construction has begun to slow from the Q1 peak.

Economic market conditions have disrupted many sectors of the real estate industry. However, the industrial market continues to hold its ground, specifically in the Inland Empire. Overall, lease activity remains healthy with over thirty big-box (100,000 square feet or greater) deals being executed this past quarter, which is more than Q1. About 65% of those transactions were new deals. Total renewal activity among all size ranges took up just 18% of all lease transactions, while about 13% of all deals were subleases.

Despite the strong volume of deals being done, the amount of completed industrial product over the last year has begun to bump the vacancy rate up.

As anticipated, the Inland Empire industrial market has begun its course back to normal market conditions as a result of the current economic state. Nevertheless, any fundamental shifts happening in the I.E. has not disrupted institutional or credit tenant interest, as companies including Home Depot, Constellation Brands, Michelin Tire, Nordstrom, Pepsi, etc. have all continued to commit to considerable space in the market, solidifying the Inland Empire as one of the continued top industrial markets in the nation.

The year started off strong with extraordinary big-box activity, as the number of transactions 100,000 square feet or greater remained consistent with last quarter (nearly 30). Not only has gross absorption stayed constant with previous months, there were more top deals (500,000 square feet or greater) executed in this quarter than last. In Q1, the top three leases were over 1M square feet, and the top three sales were all staggering nine-figure transactions.