INLAND EMPIRE, CA—Southern California industrial users who historically would have turned up their noses at the Inland Empire are now being forced to consider all options in the face of an ever-tightening market with climbing rents, Voit Real Estate Services associate Adam Geiger tells GlobeSt.com. We spoke with Geiger, who is based in the firm's Inland Empire office, about the appeal of this market and the factors that have led to its strength.

GlobeSt.com: How would you characterize the Southern California industrial sector's fundamentals?

Geiger: If you have even somewhat been paying attention to what is going on in the industrial real estate world, then you are already aware that Southern California industrial real estate continues to outperform pre-recession metrics on every front. Land prices are as high as they've ever been. Building prices are as high as they've ever been. Lease rates are as high as they've ever been. Cap rates and vacancy rates are as low as they've ever been. There has actually never been a better time in history to be an industrial landlord or owner/user, particularly if you purchased your building(s) 4-7 years ago.

GlobeSt.com: What does this mean for users?

Geiger: The flip-side of that coin is that being an industrial tenant with a need for a larger, more efficient building is about as difficult as it has ever been. Vacancy rates in Orange and Los Angeles counties are less than 1%. You will hear brokers in these instances say that vacancy is 0%. If you are lucky enough to find a building that fits your user's requirement in one of these markets, your client is going to be paying for it. The rent differential between, say, Rancho Dominguez and Ontario for a 100,000-square-foot building is in some instances upwards of $0.30 per square foot–approximately $30,000 a month in rent savings (30%) in exchange for an hour-long drive further east.

GlobeSt.com: How does this all play out for the Inland Empire?

Geiger: This has been the perfect storm for the Inland Empire: land for speculative development has helped fuel the availability of state-of-the-art product in all size ranges including buildings exceeding 1 Million SF, that can address the demand of users coming out of other markets, as well as the new “silo” of demand for e-commerce, whose buildings are twice the size, on average, of a non-e-commerce company. That, coupled with the rental rate savings has provided the Inland Empire with consistent year-over-year absorption of 20M – 30M SF since the end of the Great Recession in 2010.

GlobeSt.com: How are users responding to what the Inland Empire has to offer?

Geiger: The good news for the users is that the development community in the Inland Empire continues to deliver efficient product at cost-effective pricing, so more and more tenants continue to make the move. The Inland Empire is currently on track to deliver another nearly 30 million square feet of new product in 2018, all of which will more than likely get absorbed as quickly as the buildings finish construction, if not before. We keep hearing “this feels like the top,” but user demand is still strong and we can't seem to find any market drivers that point to another downturn.

So, basically, the Southern California industrial real estate market is continuing to fire on all cylinders. Anecdotally, we have case study after case study (Amazon is the best example) of companies who relocate to the Inland Empire with a need for one facility that eventually grows into multiple facilities as the health of the economy continues and businesses look to support their sales growth with additional warehouse needs. No other industrial market in Southern California can accommodate this growth than the Inland Empire.

GlobeSt.com: How would you characterize the Southern California industrial sector's fundamentals?

GlobeSt.com: What does this mean for users?

GlobeSt.com: How does this all play out for the Inland Empire?

GlobeSt.com: How are users responding to what the Inland Empire has to offer?

Instant Insights /

Why Industrial Users Are Flocking to the Inland Empire

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