INLAND EMPIRE, CA-The most striking sight for anyone driving around Riverside and San Bernardino counties these days is the number of new houses being built on the vast stretches of open land here. And if there is a second most striking sight, it has to be the number of new retail centers that are rising, often so quickly that the doors of the stores are open the minute the new homeowners move in—and sometimes even sooner.Retail construction in the two-county area known as the Inland Empire has reached a level that Bill Bauman, an SVP for retail properties at Colliers Seeley International, describes as “explosive,” with developers building everything from small convenience centers to power centers to venues like the recently opened, 1.3 million-sf Victoria Gardens in Rancho Cucamonga.

The retail boom is following the region’s housing boom in the familiar pattern of retail follows rooftops, Bauman says, pointing out that 24,000 new homes are being built in the community of Mira Loma alone as the Inland Empire continues as one of the fastest growing places in the nation for new home construction. Some retail centers are even being built before the housing arrives, “in anticipation of the residential development,” Bauman adds. He cites two retail projects in North Fontana, one of 430,000 sf and another of 250,000 sf, that are both under way in “in anticipation of housing growth that hasn’t occurred but is in an advanced stage of planning or pre-construction. In the Coachella Valley, known best as the home of Palm Springs, the town of Indio is probably the fastest growing in a valley that “is just exploding right now,” Bauman says. Among the Indio projects is the Indio Market Place, a 700,000-sf retail center currently inthe midst of its pre-leasing that is expected for completion in fall of 2006 and for which Bauman is leasing agent.

Another project he is leasing, in Southwest Riverside County, indicates the types of tenants the Inland Empire is now attracting: Slated to open in the spring of 2006, the 340,000-sf center in the city of Murrieta is called Village Walk and will be anchored by Babies R Us, Bed, Bath & Beyond, SportsMart, Levitz, and Office Depot.

Other national names popping up in the Inland Empire retail venues include Target, Home Depot, Lowe’s, Wal-Mart, Linens N Things and a host of other national retail chains that are attracted by the growing population, demographics and availability of retail sites where they can build the types and sizes of stores they want, Bauman observes.

“One of the attractions of the Inland Empire is the large availability of land,” Bauman says. “There is enough land to lay out the center and give the retailers their prototypical dimensions, whereas in Los Angeles they have to be more creative or flexible in terms of the size and maybe even the types of locations they can find.” He adds: “It’s easier to assemble the properties in the Inland Empire. In Los Angeles, you might have to put three or four parcels together to assemble a five-acre property, but here you can assemble a 40-acre property from one ownership.”

Besides developers, the Inland Empire properties are attracting investors who see the region as a good long-term prospect. Bauman says a 93,000-sf center near Victoria Gardens is being marketed for $29 million, which will put the price in the low 6% cap rate range, comparable to prices paid in other Southern California markets. “Right now, any good credit-anchored center is trading in the mid-6% cap rates right now. Those same deals last year were trading at 7%,” Bauman says.

The breakneck pace of home construction and the retail following the residential are bound to slow eventually because “There is always a saturation point at which everyone will be in the market and growth will slow,” Bauman says, “but the Inland Empire is a long way from that.” For the time being, he says, “The retailers want to get in and plant their flags early so that they can get marquee locations.”

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