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September 30, 2023
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Inland Empire Industrial Demand is Spiking


This Inland Empire Q3 2021 Industrial Market Outlook report was provided by real estate services firm NAI Capital.


The industrial market in the Inland Empire is going through the roof as a supply chain crisis continues to overwhelm the ports of Los Angeles and Long Beach waiting to unload thousands of cargo containers headed for local warehouses. While the economy recovers, more than a year after the pandemic shutdown began, demand for warehouses is spiking, rents are rising, and developers are racing to complete projects – and building more. Completed industrial space jumped 17.7% and space under construction increased 12.5% from the prior quarter to more than 20.8 msf in Q3.

Vacant industrial space declined 51.4% in Q3 2021 from Q3 2020, as the average asking rent increased 5.6% from Q3 2020 to $0.76/SF triple net. The vacancy rate fell to a new all-time low of 1.8%, down 200 bps points from Q3 2020, despite more than 12.7 msf of completed construction added to the market this year. Since Q3 2020, the market has absorbed approximately 33.8 msf, compared to 22 msf of completed construction added over the same time. Demand for large distribution centers continued, driven by ecommerce, pushing construction further into the East Inland Empire.


The depletion of land in the West will continue to drive up development, land, rent, and sale prices in the East Inland Empire. In the East, the pace of completed construction quickened this quarter, up 20% quarter over quarter, as demand remained hot. Asking rent in the East increased 13.2% from Q3 2020 to $0.86/SF triple net – one cent above the West Inland Empire. Vacancy in the East declined 280 bps from Q3 2020, despite more than 13.2 msf of completed construction added over the same time frame.

The Inland Empire had 149 projects totaling over 20.8 msf under construction this quarter, with an average size of 145.4k sf - 9.6% larger than the average last quarter. Vacancy in the West plummeted to a low 1.5%, the tightest in the region, which is causing development to move further East. Nine of the top 10 largest projects under construction are in the East. Land for development will continue to get scarcer and pricier, fueling higher prices for completed space, particularly along the region’s main logistics and distribution corridors.

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