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ONTARIO, CA-The Inland Empire industrial market remained one of the fastest growing in the US during the first quarter, absorbing 3.4 million sf of space in a performance that indicates an increase in leasing, according to report from Cushman & Wakefield and Grubb & Ellis.The C&W report notes that more than 4.6 million sf of new industrial space was completed in the quarter amid increased tenant demand that produced a total of nearly 6.5 million sf of activity in the region during the quarter.The overall vacancy rate in the I.E. dropped to 8.7%, well below the 9.4% recorded in the fourth quarter of 2003, continuing the trend toward gradually falling vacancy rates across the market, the C&W report says. That 6.5-million-sf activity figure was the highest point since the second quarter of 2003, the report notes, pointing out that the abundance of available space for lease in the I.E. West market during the fourth quarter of 2003 and through early 2004 was mostly absorbed in the first quarter. Average asking rental rates over all product types stood at 38 cents per sf per month, triple net. The Grubb & Ellis report pegs the I.E. industrial vacancy rate at 6.4%, a two-point difference from the C&W figures, but it shows the same trend toward decreasing vacancy–a drop of 1.5% since the first quarter of 2003. It cites tightening vacancies, steady leasing activity and absorption, asking rental rates inching upward and low interest rates among the factors lifting the market. “ProLogis, one of the largest owners of distribution space in the Inland Empire, acquired Rancho Cucamonga’s Arrow Business Park–a site that had been on the market twice before with different sellers in the last three years–reinforcing that investors are chasing a limited supply of available product,” the Grubb & Ellis report points out. It cites the big boost that Stater Bros. brought to the Inland Empire when it signed on with Hillwood Investments’ development at the former Norton Air Force Base to consolidate the supermarket chain’s distribution operation and headquarters in a planned 2.2-million-sf project. The G&E report sounds a word of caution, however, regarding the vitality of the manufacturing sector. That vitality remains a concern because the region lost 2,500 manufacturing jobs during the past year. “The region is far from invulnerable, despite leasing trends that may suggest otherwise,” the report concludes.

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