IRVINE, CA—Much of the inventory in Downtown Riverside is municipality owned, and rents are still not recovered enough to justify development, so acquisitions in this market are rare, Eric Smyth, principal of Irvine-based CIP Real Estate, tells GlobeSt.com. As we reported last week, the firm has acquired Center Tower Riverside a five-story, 73,000-square-foot, class-A office property in Downtown Riverside and has inked new management contracts for Ontario Airport Towers, a six-story, 147,000-square-foot, class-A office property, and Empire Towers V, a five-story, 125,000-square-foot, class-A office building, both of which are located in the Ontario International Airport submarket. We spoke exclusively with Smyth about these acquisitions and what attracts the firm to the Inland Empire office market.

GlobeSt.com: Why does the Inland Empire office market interest you?

Smyth: We've been investors and managers in the broader Inland Empire market for the past 25 years, but from the standpoint of Inland Empire office. For the last 12 to 13 years, we've been a primary owner of office in the Ontario Airport area. We've been a dominant force out there, but not in the Downtown Riverside market.

Downtown Riverside only has four class-A office buildings that are privately owned; the others are owned by municipalities, either state, city or county, and some federal. It's rare to have office buildings of quality acquired in Downtown riverside. Also, this building in particular needed renovation and refurbishment. I like to take on projects that need valued-added physical work. These buildings had become tired over the last 10 years. In addition, the demand for Riverside Downtown space has never slackened. It's been a tremendous growth engine in the court systems—it's where all the federal, county, city and state courts are located—and it's a very supply-constrained market that's 150 years old. Pretty much everything Downtown has to be renovated.

Also, the Inland Empire office market has started to recover strongly from the deep recession of 2008 to 2012. It's really started to improve, and obviously industrial has done very well, but office trails by two years or so. But with job growth and housing improving, industrial warehouses and distribution feed off that as well.

GlobeSt.com: Where do you see this market heading in the future?

Smyth: Downtown Riverside will probably not see any appreciable development of class-A office for years. There's no land, it's historically preserved and supply constrained. In the Inland Empire as a whole, office rental rates are below where you could support construction. They are 33% to 50% under where you need to be to start development. Some markets are seeing decreases in overall vacancy, but we're still not seeing it up to the point of new construction. For the next five years, we will probably see no new construction. We'd all love to see rental rates increase to that point, but it's not happening yet.

GlobeSt.com: What do you look for in a property that you are seeking to manage?

Smyth: We like to take on properties that are synergistic to what we already own. There are economies of scale in that, and we're able to manage assets efficiently from our relatively large base in Ontario. From an acquisition perspective, we like to take on a property that has good bones, that tenants are going to want when we renovate them, and the buildings we manage are similar in nature. We like to try to buy or manage the best in class, and we're fortunately able to do that.

GlobeSt.com: What else should our readers know about your firm?

Smyth: We're celebrating our 20^th anniversary. We've acquired industrial properties in the two counties that make up the Inland Empire, and remain active acquirers of industrial and office product in Southern California. We see a lot of opportunities in the Inland Empire; things are very heated and desired in the coastal areas of the market, and we're focused on Orange County, L.A. and the Inalnd Empire as part of our program.