Are Inland Empire Industrial Rents Plateauing?

Industrial rents might be plateauing in the Inland Empire. According to recent research from NAI Capital, industrial rents in the Inland Empire region increased $0.01 in the first quarter compared to the fourth quarter 2018. Despite the near flat quarter-over-quarter activity, industrial rents in the first quarter were up more than 18% year-over-year, illustrating strong demand. Rents are flattening out for class-b and vintage product in the market.

“A class-A building over 100,000 square feet is typically going to feature 36-foot clear heights, ESFR, 135 to 180-foot truck courts and built in the last five years. User demand for those buildings is only increasing,” Nicholas Chang, SVP at NAI Capital, tells GlobeSt.com. “For a class-B asset that is vintage construction or is in a size class where there is not a lot of aggregation of space among corporate users, rents are stalling or in some cases they are falling. We saw this in the last economic cycle where there becomes a flight to quality.”

While rents are flattening for older or lower-quality product, rents are continuing to increase for new construction. This is good news. There is currently more than 27 million square feet of class-A industrial product under construction, with individual boxes ranging in size from 7,000 square feet to 1.2 million square feet. “There is no concern about the space being absorbed because there is still strong demand for new class-A product,” says Chang.