Inland Empire Industrial Market To Falter Further As Year Progresses

The Inland Empire’s already hard-hit industrial market will weaken further this year as import activity and consumption slow, but fundamentals will be significantly worse in the eastern half of the market, according to the Midyear 2009 National Industrial Report by Marcus & Millichap. In recent years, builders constructed in advance of demand, adding an average of 20 million square feet annually, primarily in the eastern reaches of the metro. Also included in the report is the firm’s Midyear National Industrial Index (NII), a snapshot analysis that ranks 28 industrial markets based on a series of forward-looking supply and demand indicators. Riverside-San Bernardino is at No. 26 this year.
“Sales velocity has been limited by a wide buyer/seller pricing expectations gap in recent months and will likely remain slow for the rest of the year as investors wait to target distressed assets,” says Douglas McCauley, regional manager of the firm’s Ontario office. Following are some of the most significant aspects of the Riverside-San Bernardino Industrial Research Report:

• Employers are expected to shed 42,000 jobs in 2009, a 3.5 percent decrease in total employment.
• Builders will deliver nearly 6.1 percent million square feet of space this year, down from 22.6 million square feet in 2008.
• Reduced space demand and ongoing construction will push up vacancy 370 basis points to 16.1 percent in 2009, after the average rate spiked 510 basis points last year.
• Owners will cut rents aggressively to stay competitive. This year, asking rents are set to fall 11.8 percent to $4.65 per square foot, while effective rents will drop 12.7 percent to $4.35 per square foot.