The Inland Empire industrialmarket held strong through the first quarter. The impact of thecoronavirus pandemic has shown up in some quarterly reports forother asset classes; however, research from KidderMathews show the Inland Empire did not show any signs ofslowing at the start of the year, despite the disruption. Thequarter closed with industrial vacancy down 20 basis points to 4%and net absorption of more than 6 million square feet, including a1.2 million-square-foot lease signed by Kimberly-ClarkCorp.

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"We had pretty good momentum from the fourth quarter of 2019into 2020, and we have had three years of very strong metrics andmomentum that has carried us year-over-year into a very positiveclimate and activity," Dave Burback, SVP andmanaging director of Kidder Mathews' Inland Empire office, tellsGlobeSt.com. "If you broke the quarter down into thirds, the firsttwo months of the year were very positive. It started to take atoll in March."

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The industrial sector, in general, is widely expected tooutperform other asset classes through this crisis—although expertsare quick to remind that no asset class will be unscathed. If thatis the case, the Inland Empire's industrial market is thebest-positioned geographic market in the nation. "The Inland Empirewill benefit from this trend more than any other geographic regionin the country," says Burback. "It not only has the largest portsin the country but it has the ability to expand distributioncapacity, specifically in the ecommerce arena."

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There is even the potential for upside in this event,particularly among ecommerce retailers that have actually seen anincrease in sales. Burback says gained business is already areality. "Everyone got sent home. Many people assume that everyonein this country is an Amazon customer, but that is far from thetruth," he says. "People are now at home using Amazon for the firsttime, and they get a package and become believers. Historically,ecommerce has been increasing its market by 15% year-over-year, andI think that will accelerate, maybe to 25% going forwardyear-over-year. That success will largely be at the expense ofretail."

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Prior to the pandemic, the Inland Empire had a supply demandimbalance, and while it is still too early to understand the realimpact of this event—and the first quarter report data isn'tcompletely correlated—that supply-demand imbalance won't disappearfollowing the pandemic. In fact, it could become more severe. Inthe first quarter, more than 5 million square feet of newindustrial space came to market, and the vacancy rate continued toinch down to 4%. As a result, many developers are pushing ahead oncurrent projects. "Large development projects are moving forward.It takes a good amount of time to entitle land for industrial useto build the larger industrial buildings," says Burback. "Thoseseem to be continuing on because when we come out of the back endof this, the timing will be good for new product to meet the needsof traditional warehouse distributors and ecommerce."

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This isn't to say that the Inland Empire doesn't have some harddays ahead. "We could have this conversation three months from now,and it will be night and day," says Burback. "I think there will bea significant impact, but out of all of the food groups, industrialwill fair better than others."

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.