ONTARIO, CA-A new office research report for the Inland Empire foresees a continuation of the growth in population and labor force that have made this office market a top performer. The study, by Marcus & Millichap, underscores factors that have kept vacancies low and contributed to an overall performance that has ranked the Inland Empire office market among the strongest in the country statistically in recent years. The study cites “an improving labor force” that is luring more companies from the coastal markets of Southern California. “A growing number of companies are relocating to the Inland Empire, attracted by lower operating costs and the local work force,” the report says. As a result, it continues, “This promising outlook has attracted the attention of investors who are willing to pay a premium for office properties in the region.”Among the factors cited by the study the expansion of local employers, with a job growth rate of 3.2% predicted for the rest of the year. That translates into office users, the study points out, because the professional and business services sector is “growing at a rapid pace and is on schedule to add a total of 7,000 positions this year.” The amount of office space being released into the market will increase from 58,000 sf in 2003 to 515,000 sf this year. “Many of the projects being delivered this year have no tenants signed on, demonstrating the level of confidence office developers have in the market,” the report says. The submarkets where office space demand is the highest demand include Rancho Cucamonga and Corona, where vacancy rates decreased by 2% and 2.3% respectively since the end of 2003, settling at 7% in Rancho Cucamonga and 5.7% in Corona. M&M expects effective rents to increase by 4% for this year, the same percentage they increased last year, with overall monthly asking rents now at $1.52 per sf per month and class A rents at $1.85 per sf per month. Despite the good market, the report expects sales to remain slow because of the limited supply of properties on the market. But prices are likely to be pushed higher because large amounts of capital are chasing the few office buildings that come up for sale.

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