INLAND EMPIRE, CA-The Inland Empire is fast becoming the darling of the industrial investment community. The region is gathering interest from a variety of investor profiles seeking to be represented in this market. GlobeSt.com caught up with Barbara Emmons, vice chairman of CBRE—who is moderating a panel discussion on investment in the Inland Empire at RealShare Inland Empire on January 28—to discuss this phenomenon, what investors look for in this market and what’s driving the sector.
GlobeSt.com: Why are investors choosing the Inland Empire as an investment destination?
Emmons: The Inland Empire is probably the most active and sought-after industrial market in the country. All major institutions and industrial REITs want to have a presence in this market. Fortune 500′s and most major corporations either have or are looking to have distribution centers in the I.E. to service both Southern California and the Western US.
GlobeSt.com: What is the key investment criteria in this market for 2014?
Emmons: When investors consider the I.E., they really take into account the building features. A state-of-the-art building in the I.E. can be different than the rest of the older L.A. basin. There is a fairly significant pricing spread between class-A, state-of-the-art product and B or C product in the I.E. Investors will pay a 5% or below cap for class-A buildings that are leased at rents at or below market. Thirty-foot-plus clear heights, ESFR sprinklers and large truck courts are key for class-A buildings in the I.E.
GlobeSt.com: What kinds of property types are investors looking at in the Inland Empire, and which are emerging as strong?
Emmons: Industrial is the hottest product type in the I.E. Absorption and tenant demand are driving the industrial market and new construction. Given entitlement barriers, cost and availability of land, there appears not enough new construction to satisfy upcoming demand, especially in the larger buildings over 700,000 square feet. Residential is rebounding, as is retail. The office market will be the last to recover; however, many investors are finding strong opportunities in investing in office buildings in the I.E. and will be poised well for the recovery.