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January 22, 2021
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Inland Empire’s East Valley Industrial Market Sees Strong Fourth Quarter 2020

1/13/21

This report was provided by the Riverside office of real estate services firm Lee & Associates

The industrial real estate segment of the Inland Empire’s East Valley finished strong in the last quarter of 2020 with increased activity and positive gross absorption, according to fourth-quarter 2020 figures from Lee & Associates. Activity this quarter increased over the previous quarter as strength in the industrial sector continued to outpace the early expectations for 2020. Gross absorption for 2020 totaled 22.7 msf, continuing on the heels of the record-breaking absorption performances in 2019 of 21.2 msf, 2018 of 27.3 msf, 2017 of 16.9 msf, and 2016 of 19.3 msf.

Gross activity in the fourth quarter was 11.6 msf, with investment purchases and lease renewals accounting for 63.2% of the total. Fourth-quarter 2020’s absorption figures were 4.3 msf, compared to 4.1 msf during the same period last year. With absorption for 2020 outpacing the previous year, the industrial market is holding strong.

Despite the resurgence of the COVID-19 pandemic, state shutdowns and government restrictions throughout this year, warehouse and distribution buildings in this region continue to be in high demand. Prices and lease rates continue to slowly increase in nearly every industrial sector as businesses stockpile more inventory and goods in the East Valley. Vacancy remains low, under 5% in most submarkets, despite strong development activity and new buildings being delivered to the market.

With interest rates maintaining record low levels and a newly approved SBA government program for buyers, industrial buildings for sale will continue to be in high demand. Big Box distribution buildings continue to be a key driver in the market with many companies continuing to move or expand east to take advantage of lower sales prices and lease rates compared to areas closer to the LA Ports. Most of the new construction expected over 2021 will be in the 100k sf+ range to take advantage of this mushrooming area of commercial real estate. Most experts point to continued growth in the industrial market going into the first half of 2021.

Vacancy rates increased just slightly in the fourth quarter to 2.61%. Into 2021, the vacancy rate is projected to show an overall stable rate, although it may rise slightly given a projected increase in new supply. Warehouse and distribution space continues to be in high demand and new construction is expected to be absorbed quickly.

The base for the fourth quarter represented 10.6 msf of construction, with 90.5% of the total in the 100k sf+ range, a 5.4% increase over the previous quarter. There were 20 new buildings that completed construction in the East Valley in the fourth quarter encompassing 2.8 msf, with 39 new buildings projected to be completed in the first quarter of 2021 totaling 5.2 msf.

Average asking sales prices per SF remained stable in the fourth quarter at $168.00/sf. Asking GRS rates increased to $0.86/sf over the previous quarter while asking NNN rates increased to $0.83/sf. Actual GRS rates decreased slightly over the previous quarter averaging $0.74/sf while actual NNN rates increased over the previous quarter to $0.62/sf. Actual sale prices per sf at $169.75/sf also increased over the previous quarter.

Lee & Associates Riverside president, Dwight Hotchkiss, stated that “The Inland Empire Industrial market continued it’s amazing performance despite the headwinds of the continued pandemic. Demand for industrial space remains robust, and we expect to see this continue into 2021.”

This report was prepared by Caroline Payan, Director of Marketing and Research at Lee & Associates Riverside




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