Investors Are Still Fighting Over Inland Empire Industrial Deals
Around $1.7 billion in industrial sales have closed in the Inland Empire so far this year.
Despite the pause in some transactions around the US, many investors are still pouncing on industrial assets in the Inland Empire as record-low vacancy and sky-high rents drive competition for deals in the land-constrained region.
Approximately $1.7 billion in industrial sales have closed in the Inland Empire so far this year, with the average sale price of properties more than doubling over the past two years, according to data from CommercialEdge. The average industrial asset traded for $138 per square foot in 2020, and that number has ticked up to $299 this year.
The most popular submarket in the region is Fontana, where 11 industrial assets have sold for more than $500 million this year. The average sale price was $371 per square foot, $72 higher than the overall average sale price in the region. And the crown jewel of 2022 was the sale of the Alder Commerce Center, a 175,000-square-foot warehouse delivered last year that sold for $83.4 million, at an average of $477 per foot.
New construction in the region is frequently being pre-leased before groundbreaking. United Legwear, for example, signed a 1.7 million square foot lease for a yet-to-be-built warehouse in Beaumont. But while fundamentals remain strong for the latter half of 2022, some lower credit tenants are beginning to pull back from the market.
The region, which stretches across two counties from inland Los Angeles County to California’s border with Arizona, is facing increasing backlash from communities who oppose industrial and warehouse development in their backyards. New warehouse construction has moved to the east and to the north, where moratoria have been proposed across more than a dozen communities. In June, the Redlands City Council enacted a temporary ban on new warehouse projects in this city near San Bernardino, saying the 45-day moratorium on new development of industrial properties south of Citrus Avenue and west of Nevada Street in Redlands will enable the city to rezone the areas to make the ban permanent.
Warehouse moratoriums also have been proposed in Chino, Jurapa Valley, Perris, Riverside and San Bernardino.