2016 Breaks Gross Absorption Record

The Inland Empire market remains the most sought-after warehouse / distribution market in the United States, with the lowest vacancy rate and highest rental rate of comparable major distribution hub markets. New speculative construction activity remains on the minds of developers. In the past 12 months, there has been a total of 20.7 million SF of new supply added to the base. During this time the vacancy rate has been virtually unchanged as nearly all new supply has been absorbed by large tenants seeking modern distribution centers.

Key Takeaways:

  • Year to date gross absorption was 46,988,300 SF, the highest annual amount ever for the Inland Empire.

  • The vacancy rate fell 40 basis points over the quarter. The current vacancy rate stands at 4.1%.

  • There was 2,042,800 SF added to the base, 49% of which was leased prior to completion.

  • Strong demand and brand new industrial buildings are helping to drive up asking rents. Asking rates have increased $0.01 PSF NNN over the quarter to end at $0.53 PSF NNN.

  • There is currently 17,017,200 SF of space currently under construction. The pace of construction activity increased over the quarter, especially for smaller projects.

  • Net absorption recorded 4,271,000 SF for the quarter and 19,521,900 SF for the year.

Outlook:

Demand remains strong and continues to outpace supply. This is leading to increased construction for large modern distribution centers, driven largely by E-commerce companies further expanding their industrial footprint. The trend of previous years has seen US companies transferring the manufacturing of their products overseas. 2017 may see a shift of more manufacturing returning back to the US as the cost of shipping, changes in political environments and rising wage growth overseas may tip the balance back towards manufacturing within the United States.