Inland Office Market Rolls Along

There was some concern that there was too much product being introduced too soon, but "That doesn't appear to be the case" based on the third-quarter numbers, says Mary Sullivan, national client services director at Grubb & Ellis. She cites absorption of 483,845 sf in the quarter, bringing the year-to-date total to more than 1.5 million sf.

Strong demand and declining vacancies have pushed monthly asking rental rates up 10 cents to $1.96 for class A and up 18 cents for class B space, Sullivan's report says. It notes that half of the 401,752 sf of the new office space that emerged from the construction pipeline in the third quarter was absorbed. Besides the new space that was absorbed, some 1.5 million sf of additional office space is under construction.

Among the new space that was spoken for in the third quarter was Phase I of Crossroads Corporate Centre in the South County market, a 78,000-sf class A project that was 100% leased. Also in South County, two class A projects, Garret Corporate Centre and the first building of Vail Ranch Towne Square, debuted nearly 75% leased.

Leasing and pre-leasing also were strong in the Ontario Airport submarket and in the San Bernardino area, Grubb & Ellis reports, noting that nearly half of the 317,000 sf at the Carousel Mall has been converted to office space and is partly occupied by two San Bernardino County departments. The former retail space competes by offering lower rates than the new office buildings.

The for-sale office market is poised for a surge of sales of office condominiums, according to SVP John Ewart in the Grubb & Ellis Ontario office. Ewart says office condos "will be the next hot item for private investors." Five such developments are slated for the South County submarket, with asking prices ranging from $270 per sf to $310 per sf, Ewart says.