2017 Continues With Rising Rents & Absorption

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 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:

  • Industrial demand remains strong, with 3.5 MSF of positive net absorption this quarter. This is due to rising E-commerce sales and continued changes in supply chain technology.

  • Asking rents increased $0.01 PSF NNN over the quarter and has increased $0.06 PSF NNN over the last 12 months. Rents are also 10 cents higher than the previous peak of $0.45 PSF NNN in 2007.

  • Vacancy remained flat over the quarter at 4.1%. Vacancy remains near an all time low as demand continues to outpace gains in supply.

  • Construction completions were 3,451,500 SF for the quarter. There remains 17,400,400 SF still under construction.

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.