The Inland Empire region, known for its robust industrial market, has shown a mix of growth and challenges in the fourth quarter of 2023. The latest Cushman & Wakefield Mid-Quarter Report for Q4 2023 provides an insightful glimpse into the region’s industrial sector, highlighting key metrics and trends that are shaping the local economy.
The year-to-date figures for new leases signed in the Inland Empire are impressive on the surface, totaling 28.9 million square feet across 400 transactions. This activity, however, represents a 19 percent decrease compared to the same period in 2022, suggesting a slight cooling in the market. Despite this, there was a 6.5 percent increase in new leasing activity compared to the third quarter of 2023, indicating a resilient market and a little momentum gain back into the sector.
The vacancy rate in the region has increased to 4.9 percent, up by 70 basis points from the previous quarter. The availability rate stands at 8.1 percent, reflecting a relatively tight market despite the uptick in vacancy. This increase in vacancy rates can be attributed partly to the rise in sublease space, which now constitutes 27 percent of the total available space.
A significant amount of industrial space, amounting to 27.4 million square feet, is currently under construction. This high volume of development activity is a testament to the ongoing demand for industrial space in the region and the developers’ feelings about where the industry may be heading in the near to mid-term. Completed projects include a 1,004,400 square foot space in Hesperia by Covington Group, while ongoing projects feature a 337,450 square foot space in San Bernardino owned by Logistics Property Co.
The report highlights several noteworthy lease transactions, with companies like Maersk Logistics taking down 1,227,600 square feet from Westcore in Hesperia, Marc Fisher Footwear leasing 585,064 square feet from Clarion Partners in Redlands, and GigaCloud securing 410,006 square feet from Prologis in Fontana.
The increase in available sublease space to 13.3 million square feet is a notable trend, impacting the overall market dynamics. Additionally, the average monthly asking rent stands at $1.44 per square foot, aligning with the increase in vacancy rates. Deliveries year-to-date have totaled 27.8 million square feet across 109 properties, with a net absorption of 3.2 million square feet.
The Inland Empire’s industrial market continues to be a key player in the region’s economy. While there are signs of a market shift, as evidenced by the increased vacancy and availability rates, the robust construction activity and significant lease and sale transactions indicate a market that is adapting and evolving.
