WESTERN SNAPSHOT, JANUARY 2010

Inland Empire Ins & Outs 

1. Biggest surprise in 2009 in the Inland Empire’s retail sector?

The biggest surprise that is facing the Inland Empire’s retail sector is the dramatic increase in the unemployment rate from a lofty 10.1 percent in December 2008 to more than 14 percent as of December 2009.

2. Biggest determinant in 2010 of the performance of the Inland Empire’s retail market?

The Inland Empire retail market is facing the double whammy of declining fundamentals (i.e., higher vacancy and lower rents) along with struggling capital markets. If the fundamentals don’t improve in 2010, we run the risk of a downward spiral whereby capital refuses to enter the market in a significant manner. The biggest struggle today is that lenders, investors and developers just don’t know what rental rates, absorption rates and cap rates they should use when doing their projections. Stabilizing fundamentals will give investors and retailers confidence and encourage investment in the market. 

3. Biggest player in the sector in 2010 and why?

The Inland Empire does not currently have any large retailers with significant expansion plans, and most large developments have been put on hold. The biggest player in 2010 will be the housing sector. Housing prices stabilizing and residential transaction activity increasing will have a significant impact on consumer confidence and employment. The Inland Empire must have an improving housing market in order for the economy to show significant improvement.

— Brad Umansky is president of Progressive Real Estate Partners in Claremont, California.

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