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WESTERN SNAPSHOT, FEBRUARY 2010
Inland Empire Office Market
• Riverside, California
1. MARKET MOVES
In July 2009, Edgemont Community Services District delivered a 92,410-square-foot office building located at 6465 Sycamore Canyon Blvd. Today, the property remains nearly 50 percent vacant, which demonstrates that office vacancies are still growing throughout the region. Because of the submarket’s high vacancy rate, developers have put new developments on hold to avoid sitting on additional empty buildings. In fact, the only speculative office building currently under construction in Riverside is Mission Grove Corp. Plaza located at 7888 Mission Grove Parkway. Regional Properties broke ground on the 41,000-square-foot office property in 2009 with an estimated delivery time of this month, and at this point no space has been pre-leased at the property.
2. MARKET MEASURE
Vacancy rates crept upward each quarter in 2009, reaching a high of 24.8 percent in the fourth, and they are expected to continue increasing through 2010. As long as vacancy rates continue to climb, the office market will exhibit weak fundamentals. Until companies are in a position to hire more employees, vacancy will remain high because the demand for office space is low.
3. THE MARK OF A MARKET
The Riverside submarket reported more leasing activity in fourth quarter 2009 than any other submarket in the Inland Empire with 54,500 square feet transacted. While much of this activity was a result of tenants consolidating their office space, there were several instances of landlords coming to terms with new tenants on lease agreements, which is encouraging for the region.
• Ontario, California
1. MARKET MOVES
Construction was almost at a standstill in Ontario throughout 2009, and no major office buildings are planned for completion in 2010. The upside to the lack of construction is that no new vacant space will be added to the market. With regards to sales activity, one of the largest office transactions for 2009 occurred when a 40,000-square-foot office building located at 1260 South Dupont Ave. was sold for $7.2 million ($180 per square foot). This was an attractive property because it only contains a single national tenant, Time Warner Cable.
2. MARKET MEASURE
Average asking lease rates remained quite steady throughout 2009. From first quarter, 2009 average asking lease rates declined by just $0.04 per square foot to the rate of $2.17 at year’s end. It is expected that asking rents will decrease more significantly this year in order to attract new tenants to the region.
3. THE MARK OF A MARKET
Ontario and the rest of the Inland Empire were once viewed as a low-cost alternative to Los Angeles and Orange counties. Though still a lower-cost alternative, it is now a mature market with domestic growth. Ontario is the epicenter of this newly matured market. It is also home to the market’s only international airport, which gives it a distinct advantage over other submarkets in the Inland Empire. While neighboring submarkets can try to entice prospective tenants with lower average asking lease rates, Ontario has a clear location premium for tenants who prefer to be close to the airport.
Josh Hayes-McKeirnan is a vice president in Colliers International’s Ontario office.
SCLC: High Desert Hot Spot in the Inland Empire
The Inland Empire market currently has approximately 58 million square feet of space available for sale or lease, according to Thomas Galvin at Colliers International in Ontario. Approximately 567,000 more square feet of industrial space was occupied in fourth quarter 2009 than in third quarter, marking the first time in more than 2 years that industrial demand has been positive.
Located in the northern portion of San Bernardino County, the largest county by area in the lower 48 states, the High Desert area (aka the Victor Valley) of the Inland Empire continues to stand out with its impressive development and deals. The largest amount of industrial absorption in the last year occurred at Southern California Logistics Centre (SCLC), a 2,500-acre commercial complex formerly known as George Air Force Base located near Victorville, California, and Interstate 15. Situated on approximately 8,500 acres in the foot print of the decommissioned Air Force base, Global Access is a multi-billion dollar intermodal truck, rail and air business complex that integrates manufacturing, industrial and office space.
In first quarter 2009, Stirling Capital Investments announced the sale of 53 acres of land to Dr. Pepper/Snapple Group Inc., which is nearly complete now on a new 850,000-square-foot Western Production Distribution Center valued at nearly $120 million. Production is scheduled to begin in March at the DPS facility, which consists of approximately 550,000 square feet of warehouse space and a 300,000-square-foot manufacturing plant.
“In addition, Stirling Capital Investments announced that it achieved its second LEED gold certification for a 1 million-square-foot industrial distribution building constructed within SCLC — the largest speculative industrial green building in the world,” says Brian Parno, vice president of Stirling Capital Investments, a joint venture between Foothill Ranch, California-based development company, Stirling, and Denver-based DCT Industrial Trust Inc.
Adds Parno, “The 1 million-square-foot industrial property is the largest building constructed as a part of the Phase I development of SCLC totaling more the 6.5 million square feet of space. Upon completion, SCLC will total approximately 60 million square feet of commercial and industrial development to accommodate future warehouse and logistics operations.”
Joseph W. Brady is president of The Bradco Companies in Victorville. |
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