What is in High Demand but in Short Supply?

[IMGCAP(1)]

RANCHO CUCAMONGA, CA—It's no secret that the Inland Empire's industrial market is, one of, if not the most active markets in the US. Case in point is the recent announcement by Goodman Birtcher, which signed one of the largest logistics leasing deals in the past 10 years in Southern California with Georgia-Pacific, as GlobeSt.com previously reported.

Bill Heim, Eloy Covarrubias and Joe Werdein of Lee & Associates Ontario are the exclusive leasing agents for Goodman's 1.6 million-square-foot facility in Rancho Cucamonga. The team, which specializes in major land sale and institutional landlord representation, also represent over 10 million square feet of large logistic and warehouse properties throughout the Inland Empire. So what exactly is going on in the Inland Empire, and why does is the explosion happening now?  Heim of the Heim Team, who has a long history in this market, sat down with Globest.com to discuss the trend and what it means.

[IMGCAP(2)]

GlobeSt.com: It wasn't that long ago when Goodman Birtcher opened the Goodman Logistics Center Rancho Cucamonga and considering how large this facility is, leased the center rather quickly. Is this normal, or is it a sign that activity is picking up across the board?

Bill Heim: It is the new normal. Major logistic facilities servicing the LA Basin and Southwest United States are in high demand and short supply. And with the ports of Los Angeles and San Pedro offering a major gateway to the Inland Empire and the rest of the country, the need to provide these mega facilities is paramount.

GlobeSt.com: Besides Goodman, what other facilities do you represent?

Heim: We have an extensive book of business with all of the major developers in the Inland Empire and we have been providing development opportunities since the beginning of the cycle. This is a quick list of our major accounts:

*IDI Gazley / Brookfield Logistics—two building 1.6-million-square-foot project in the IE East (Leases out on 1MM SF). 

*Alere—3.25 million square feet, five buildings, all within the IE West. 

*Goodman Birtcher—1.8 million square feet, five buildings, all IE West. 

*LBA Realty—1.1 million square feet, two buildings. 

*Prologis—2.25 million square feet, five buildings, 1.422 million square feet of which was just leased.  

GlobeSt.com: Are the buildings similar? 

Heim: All of the buildings share similar design which is to provide large logistics providers with the most state of the art warehouses designe for efficiency and larger capacity. The greatest strength of the Inland Empire is that we are able to provide larger warehouse space that the LA and OC markets can't provide. And given our location to the ports, it really has become the key hub on the West Coast and one of the few nationally for these type of facilities.

GlobeSt.com: Would the Georgia Pacific lease have happened three years ago?

Heim: It was actually happening three years ago despite the fact we were just beginning to come out of the recession. Several developers including Hillwood, Prologis, Overtone Moore, TA Associates, USAA, Trammell Crow, and Clarion, were building large spec facilities and were able to lease, which gives testimony to the strength of this market. We happen to be in a good time now, but this market is resilient and big, especially in the IE, which is an important selling point.

GlobeSt.com: Goodman, which is an Australian company, teamed with Irvine, CA-based Bircher to form Goodman Birtcher. Aside from Goodman, are we seeing much foreign investment in these facilities?

Heim: While Goodman's presence is huge, we really aren't seeing that much direct foreign investment. The development and the leases are pretty much confined to American-owned and operated companies. However, that isn't to say that the market won't change and we will see more direct foreign based investment. But the bottom line is that these facilities and where they are located make them prime locations.

GlobeSt.com: Do you see the market remaining this way? And if so, what factors keep it on course?

Heim: We, along with all of our strategic partners, hope the market continues on its current path. If the general economy continues on its current course, so will our market. Again, the ports, coupled with our large population, make for two huge driving factors.  

GlobeSt.com: How would you compare the current market to past years?

Heim: As with any CRE market, we are always in an ebb and flow state. However, what separates this market from others is that it is so dynamic. Of course the economy is important. With its growth, expansion is inevitable. In my years I have seen fluctuation, but there always seems to be a need to create these facilities and provide the state-of-the-art product that can service these tenants for years to come.