How Fast Will Inland Empire Retail Rents Keep Growing?

The Inland Empire retail market has enjoyed the most robust rent growth in Southern California. An earlier report from NAI Capital shows that retail rents grew 13% year-over-year in 2018 in the Inland Empire, compared to only 1.8% in Los Angeles and .5% in Orange County. Strong population growth will be behind the strong market performance, but will it hold through 2019 and continue to drive rents at this pace? Lidia Talavera of NAI Capital says rates will see modest growth this year as the market begins to bifurcate.

“We expect Inland Empire retail rates to continue to increase modestly in 2019,” Talavera, an EVP at the firm, tells GlobeSt.com. “Most of the demand is for smaller shop spaces between 1,000 square feet to 2,000 square feet and restaurant-ready space; those are the spaces where we will continue to see an increase in rents. Spaces between 3,000 to 7,000 square feet will continue to be challenged by the lack of interest from tenants.”

As is true throughout the country, retail rent growth will be strongest for grocery-anchored retail centers. These retail assets will see the most benefit from the population growth as well as a limited supply. “We expect to continue to see a steady rate of increase primarily in grocery-anchored centers,” says Talavera. “The lack of new development of this type of product has pushed some rental rates closer to pre-recession rates. In addition, well-located big-box retail space will experience steady demand helping to sustain rent increases commensurate with competition from tenants looking for space in dense population centers.”