Inland Empire Industrial Asking Rates Surge by 20%

Mega-leases of 1M SF or more are driving demand in the Inland Empire this year, with four more deals for extra-large warehouses inked in the third quarter and another announced this week.

Target has signed a 15-year, 1.2M SF pre-lease deal for a new warehouse under construction in Jurupa Valley. The facility at 6186 Jurupa Valley is part of a 3.6M SF, five-building industrial campus being developed by CT Realty in partnership with Prudential Global Investment Management.

Under the terms of the agreement, the retail giant has the option to extend the lease by an additional 15 years. The new warehouse in Jurupa Valley will increase Target’s industrial footprint in the Inland Empire to 3M SF.

Inland Empire remains the hottest industrial market in the US, with vacancies tracking at 0.6% in the third quarter, according to JLL’s latest market report.

Asking rents for industrial space in the Inland Empire continue to follow a trajectory that resembles a Saturn V rocket launch: JLL reported a 19.7% surge in asking rents in Q3 compared to the previous quarter.

According to JLL, two transactions helped drive the Inland Empire industrial market rate in Q3. International Vitamins renewed 217K SF of space in Jurupa Valley at $2.20 NNN and Ecolab inked an extension of a lease for 577K SF in Fontana.

Premium large blocks have continued pushing the Inland Empire market to record high rental rates, JLL said.

“These [1M SF+] facilities have been some of the most sought after throughout the year. Four leases of this size were signed this quarter for a total of eight for the year, a new market record. Rising inventory levels and shifting consumer spending have increased the need for extra space,” JLL’s report said.

To feed this trend, developers broke ground on 16 warehouses encompassing 1M SF or more since the beginning of 2022. Despite deliveries totaling 3.4M SF in Q3, developer remain hungry to spec out new developments to add to a record 39M SF under construction, JLL.

JLL sounded one note of caution: Q3 was the second consecutive quarter in which deliveries outpaced absorption in the Inland Empire, which may be an indication that supply is finally catching up with demand in the two-county market, which spans the region from the LA city limits to the Arizona border.

The unprecedented expansion of Inland Empire’s industrial footprint—now estimated to total more than 2B SF—is pushing developers to seek site in the desert regions of the eastern half of the market as available sites in the western half are limited to infill locations.

The burgeoning industrial sprawl has fueled a NIMBY backlash that has several communities enacting moratoriums on new warehouse development.