The Inland Empire Strikes Again

Demand from e-commerce users has been unrelenting

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The industrial market in Southern California’s Inland Empire reigns supreme by a long shot.

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The region ranked first in a list of the 100 largest warehouse deals across the nation in 2019, according to a new report by CBRE. The Inland Empire — the areas of Riverside and San Bernardino, east of Los Angeles — tallied 21 of the top 100 industrial lease agreements by square footage, which added up to 17.5 million square feet.

That 12-month performance outmatched the next closest market, Pennsylvania’s I-78 and I-81 Corridor, by 10 million square feet. 

E-commerce users accounted for 13 of Inland Empire’s transactions, ranging from 598,000 to 1.4 million square feet, according to the report. The logistics and e-commerce companies behind Inland Empire’s deals on the list accounted for more than 29.5 million square feet. The report cited steady demand from wholesalers and manufacturers of consumer goods that are looking to move inventory from the warehouse to the end-user.

Two of the largest leases were in Riverside, including the 1-million-square-foot Sycamore Canyon Business Park, which is owned by Dedeaux Properties. Cardinal Health is the tenant. Also, Nordstrom moved into a 1-million-square-foot property in Riverside called Columbia Business Park. In August, the property traded for $123.75 million, according to property records. ASB Allegiance Real Estate Fund purchased the building from Trammell Crow and Washington Capital Management.

Kurt Strasmann, executive managing director at CBRE’s Newport office, said the Inland Empire continues to lead because it is “basically five years ahead of any other market in the nation.” The region, which provides state-of-the-art facilities, has been the most prominent market for the past five to six years, he told Commercial Observer.

Looking forward, Strasmann pointed out that the Inland Empire has another 20 million square feet of industrial space under construction, which are primarily big box spaces set to be delivered in the next couple years.

“What’s incredible is every year, you think it’s going to slow down,” he said. “It’s not. 2020 will be another banner year. I don’t see that changing.”

The Inland Empire thrives because of its ability to handle large containers from the ports, according to Strasmann. About 20 million people with purchasing power also live within a 60 mile radius of the Inland Empire, and about half the total product coming in from Asia stays within Southern California, Phoenix, and Las Vegas areas, all of which are one day’s truck drive away. 

The food and beverage industry also significantly expanded its share of the largest industrial deals in the country by square footage in 2019. The increase was driven by the expansion of grocery delivery and distributors who continue to focus on home delivery. Food and beverage accounted for 13 of the top leases for a combined 13 million square feet. 

“E-commerce and logistics companies are the needle movers, but food & beverage quickly has established itself as a major player in industrial real estate leasing.,” said John Morris, executive managing director leading CBRE’s Americas Industrial & Logistics business, in a prepared statement. 

CBRE also released a report this week showing the consequences of limited space and rent growth set in the Inland Empire, driving tenants to renew leases about 6 to 12 months ahead of the expiration date. Pre-leased completions equaled more than 10.3 million square feet in 2019, and occupancy gains increased significantly. Demand for state-of-the-art facilities is expected to ignite more growth, the report said.