Inland Empire Industrial Assets Trade for More, Less Often

The Inland Empire’s industrial sector continued to be a key market for investors and developers in the first three quarters of this year. While some metrics recorded a considerable decrease compared to a year ago, mostly due to interest rates remaining high, the metro holds steady.

The market’s under-construction pipeline at the end of September reached 10.3 million square feet. A total of 32 projects were underway, accounting for 1.5 percent of existing inventory.

The Inland Empire also ranked as the fourth most expensive market in the nation, with an average price per square foot of $265, surpassed only by the Bay Area ($476 per square foot), Orange County ($319 per square foot) and Los Angeles ($297 per square foot). The total investment volume, however, clocked in at $1.5 billion year-to-date as of September, less than half the $3.8 billion registered during the same time frame in 2023.

Inland Empire’s pipeline still in the spotlight

At the end of September, the Inland Empire’s industrial sector had about 10.3 million square feet of space underway. The 32 developments under construction account for 1.5 percent of the metro’s total stock, slightly below the 1.8 percent U.S. average.

The market ranked fifth nationally in terms of pipeline, while Phoenix held onto first place, with 33.8 million square feet. Among other major industrial markets, the metro fared better than Chicago (8.9 million square feet), New Jersey (6.8 million square feet) and Indianapolis (2.3 million square feet).

Year-over-year, the Inland Empire’s industrial deliveries increased significantly, showing that the market is still a hotbed for activity. In September, a joint venture between Wildcat Capital Management and DECA Cos. obtained $135 million to finance the construction and lease-up of Perris Gateway, an 850,000-square-foot industrial property in Perris, Calif. The already underway facility is expected to be available for lease in 2025.

Another notable project in the metro is Shopoff Realty Investments’ 1 million-square-foot facility. The company acquired a 55-acre site back in June and plans to complete the distribution and warehouse space by the end of next year.

Industrial completions rise year-over-year

The Inland Empire’s industrial sector saw roughly 19.2 million square feet of space being delivered year-to-date as of September. A total of 57 properties came online, accounting for 2.9 percent of existing stock, more than double the 1.4 percent national average.

Additionally, the metro’s completion pipeline slightly grew compared to a year ago, when about 18.4 million square feet of space were delivered. Among peer markets, the metro fared better than Indianapolis (6.1 million square feet) and New Jersey (7.1 million square feet), but was surpassed by Phoenix (23.5 million square feet) and Dallas (25.2 million square feet).

Earlier this year, Affinius Capital completed the almost 1.9 million-square-foot Building 1 at Beaumont Crossroads Logistics Park II in Beaumont Capital, Calif. The developer took out a $152 million construction loan last year, originated by Citizens Bank, CommercialEdge data shows.

Inland Empire remains one of the priciest markets

The Inland Empire’s industrial investment volume year-to-date as of September reached north of $1.5 billion. Peer markets such as Dallas ($3.4 billion), the Bay Area ($2.8 billion) and Houston ($2.1 billion) surpassed the metro, while Orange County ($803 million) and Philadelphia ($687 million) were at the opposite pole.

Assets in the Inland Empire traded for $265 per square foot on average, well above the $130 U.S. index. The metro ranked as the fourth most expensive market, with only the Bay Area ($476 per square foot), Orange County ($319 per square foot) and Los Angeles ($297 per square foot) surpassing it.

Following national trends, sales in the metro more than halved year-over-year, however. The Inland Empire registered $3.8 billion in transactions volume during 2023’s first nine months. Despite this significant decline, the average price per square foot rose about $13.

In one of the most notable deals of the year, Clarion Partners sold the 184,654-square foot North San Bernardino Business Park to Stockbridge Capital Group for $168.3 million, CommercialEdge data shows. The two-building campus traded for $911.43 per square foot.

Rent growth tops national figures

As of September, the metro kept its position as national leader in terms of rent growth, with a 12.1 percent increase over the last twelve months, reaching $10.72. Peer markets such as Los Angeles ($14.98) and Orange County ($15.73) were some of the priciest, while Phoenix ($9.12) and Chicago ($6.17) were at the opposite end of the spectrum.

The Inland Empire’s industrial vacancy rate during the same month clocked in at 7.3 percent, slightly above the 7.0 percent national average and 290 basis points higher compared to year-ago figures. Among peer markets, Indianapolis (8.3 percent) and New Jersey (8.6 percent) fared worse, while Atlanta (6.1 percent) and Phoenix (5.6 percent) had less space available.

In June, Logistar Inc. inked a 146,816-square-foot leasing agreement at Airport Distribution Center, a 250,248-square-foot business park in Ontario, Calif. The company will occupy a full building at Alere Property Group’s campus.

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