The Riverside office of Lee & Associates, the nation’s largest broker-owned commercial real estate firm, has released its second quarter 2013 Industrial Market Summary for manufacturing/distribution buildings for the East Valley Market of Inland Southern California.
The summary reports that the second quarter, following stabilization in 2012, shows exceptional activity and absorption figures to continue, comparable to those of the previous quarter. Both activity and gross absorption remain strong in the second quarter continuing the stabilized market trends. Absorption in 2012 of just over 12 million square feet surpassed the figures seen in 2011, a trend that is expected to continue throughout 2013, with second quarters absorption posting 4.4 million square feet, and a year-to-date absorption at almost 7.8 million square feet.
Gross activity in the second quarter was over 8.2 million square feet, with investment purchases and lease renewals accounting for 47 percent of the total. Investors will remain active in the market, however, existing tenants will be proactively negotiating lease renewals and seeking expansions. Many tenants consolidated during the recession and made improvements to existing space to house more goods, with their buildings at capacity, a gradual improvement in the economy, growth from the ports and a resurgence in the housing market, tenant expansions will become more prevalent.
The report, which was prepared by Caroline Payan, marketing & research director of Lee & Associates Riverside, also shows absorption in the 100,000-square-foot range remains extremely active as Inland Empire industrial buildings reap the benefits of the Inland Ports. In addition, the report indicates that a surge in imports during 2013 is having a positive effect on warehouse space.
Vacancy rates decreased in the second quarter to 5.7 percent, and vacancy rates have now been on a declining path for almost four years from when it reached its peak at almost 20 percent in the second quarter of 2009. The report illustrates that 2013 will show more steady decreases in vacancy as the market remains stable and construction completions in the smaller building sizes are limited. There are currently no buildings under construction under 200,000 square feet.
“This second quarter report has provided positive information that indicates that the market continues on the road to recovery. As we eagerly look forward to the rest of the year, there does not appear to be any indication that this industrial market will falter in the East Valley,” said Lee & Associates Riverside President David Illsley.