With more than 350 industry professionals in attendance, a variety of panelists echoed a similar refrain: Such is the flattening of the world economy and the symbiotic relationship of the global financial markets that when a subprime loan fizzles in Hemet, CA, it's felt at a hedge fund in Australia or a bank in Germany.

As the nation braces for the foreclosure fallout, the Inland Empire, which has been among the nation's fastest growing regions in recent years, experiencing a staggering building boom, could be one of the hardest hit.

But that's only the short-term prognosis. And not one shared by all of the featured speakers. The long-term outlook is much brighter, according to Natalie Bazarevitsch, a first vice president with CB Richard Ellis. Bazarevitsch moderated a lively Town Hall Meeting, where panelists offered some reasons for caution, but mostly a bullish forecast.

Kevin Assef, a managing director with Marcus & Millichap, offered insight to the market's fundamentals. The area will see two million sf of office space added this year. "That's on top of the 700,000 sf of office added last year," Assef said.

Bazarevitsch said not to worry over the long haul. It's true "the Inland Empire's never seen more office space coming on line than in the pipeline right now. In the third and fourth quarter there's a little bump coming in the road." But a more sophisticated and diverse Inland Empire marketplace can weather that short-term dip.

Institutional players such as Rreef are making a big statement here. "They have a groundbreaking for a 150,000-sf class A office development [Aug. 15]. With other class A space to follow." She added that even if the bottom fell out of the office market, there's still retail and population growth as primary drivers. "The Inland Empire is the 21st strongest economy in the nation," Bazarevitsch said.

Job growth is another major plus for the area. Assef said the Inland Empire will add 30,000 jobs this year, with 11,000 of those going to white collar positions. The growth will help fill all the office product hitting the market, as 10,000 of those jobs are expected to need office space.

According to Keith Metzler, director of Economic Development for the City of Victorville: retail construction can't move fast enough. "Based on spending alone, another 1.9 million sf could be built and sustained."

Assef added that the apartment sector is planning about 2,300 units this year. "It was getting overbuilt, so that's good news. It's a decrease from about 3,500 units last year."

Assef said that the credit crunch reared its ugly head about three to four weeks ago. "The market was good and normal until then," Assef said. "At the beginning of the summer, we had all heard of the subprime news in the residential market, but investors were not affected in the commercial markets. Then the oxygen masks were dropped. Now, we're trying to figure out the CMBS markets and investors are taking a more cautious approach."

The RealShare event kicked off with keynote speaker Steve Schellenberg, vice president of IMS Worldwide Inc., a specialist in international supply chain solutions. Schellenberg said the Inland Empire is a major cog in the global logistics wheel, but to keep up with exponential growth in demand, the infrastructure must be in place.

That could be a challenge, he said, pointing to major points to address and projects that must see the light of day to keep the momentum of progress chugging along. Among those: adding third rail capacity to the Cajon Pass; a new international facility in Barstow or Victorville; and a spur rail link that will connect SCLA to the BNSF main line. He said rail volumes must continue to grow and currently investments are not keeping up with the pace. If that continues to happen, "rail velocity will slip," Schellenberg said.

Other topics at yesterday's event included: "Municipalities' Role in Growing the Inland Empire," "Forecasting the Red-Hot Office Market," a "Debt and Equity Update" an update on investment sales and tenant-in-common deals called "Who's Buying, Who's Selling and Why," a session titled "Meeting Population and Business Growth with Mixed-Use Development," "The Outlook for Leasing, Investment and Development in the Industrial Market" and "Focus on International Trade and Goods Movement."

Following the final panel, the conference featured a cocktail reception and networking event. RealShare Inland Empire, along with other RealShare events nationwide, is produced by Real Estate Media, publishers of GlobeSt.com, Real Estate Southern California and Real Estate Forum magazines and other print and online publications devoted to commercial real estate.

Instant Insights /

Credit Crunch, Diverse Economy Dominate Talks

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