Inland Empire Q2 2018 Office Market Overview
In the second quarter of 2018, the total vacancy rate for the Inland Empire office market increased 10 basis points from 12.5% last quarter to 12.6%. The increase in vacancy stems from the Riverside submarket, which recorded an increase of 110 basis points. The second quarter closed with negative absorption recording down 21,200 square feet. Leasing activity recorded 273,100 square feet, which falls within the three-year average.
The weighted average asking rental rate increased during first quarter to $1.79 per square foot (PSF) full service gross (FSG). As a historical perspective, one year ago the asking rental rate recorded at $1.72 PSF FSG. Four of eight submarkets witnessed positive net absorption, with Ontario recording the highest at 62,100 square feet and the Riverside submarket recording the lowest at negative 50,400 square feet. Among building classes, Class A office led net absorption at 11,400 square feet for the quarter, while Class B had the lowest quarterly absorption at -21,100 square feet.
- The unemployment rate for the Inland Empire was 3.7% as of May 2018, adding 44,700 non-farm jobs to the region over the past year.
- Trade, transportation and utilities registered the largest year-over-year gain, adding 16,600 jobs over the past year. Information and manufacturing recorded a loss of 200 jobs.
The Inland Empire office market comprises 20.4 million square feet, representing 7% of the total inventory of office buildings 25,000 square feet and greater in the Los Angeles basin. Office tenants located in the Inland Empire are predominantly firms in finance, insurance, real estate and professional services sectors. In contrast with most other office markets in Southern California, all of the space is located in low-rise (89%) and mid-rise (11%) buildings.