Is 70% off enough to make it a great deal? It might not be.

Good morning, everyone.

• Oaktree’s co-chairman says the office market could decline further.
  

• DFW’s industrial market is about to experience an oversupply issue.
  

• Demand for housing has reached one of its highest peaks in 24 years.

The Inland Empire industrial market continues its dynamic evolution, exhibiting notable changes in Q2 2024.

The vacancy rate edged up to 6.8%, reflecting a balance between new supply and persistent demand. Net absorption for the quarter stood at 3.8 million square feet (SF), underscoring robust demand amid economic uncertainties.

A total of 7.2 million SF of new industrial space was delivered this quarter, with an additional 13.2 million SF under construction. This influx has slightly increased vacancy rates but the market remains strong. The average lease rate has risen to $1.27 per SF per month, driven by high demand and limited available space.

‍

Submarket Insights:

Inland Empire East experienced a higher vacancy rate of 7.9% with a net absorption of -1.63 million SF. Leasing activity was significant, totaling 3.28 million SF, with 5.83 million SF under construction. Lease rates averaged $1.20 per SF per month.

Inland Empire West demonstrated stronger performance with a lower vacancy rate of 5.9% and a net absorption of 5.43 million SF. This submarket led in leasing activity with 9.02 million SF and has 7.39 million SF under construction. Lease rates averaged $1.30 per SF per month.

Inland Empire North showed stability with a 7.0% vacancy rate and no net absorption this quarter. While no leasing activity was recorded, 1.3 million SF is under construction, with lease rates at $0.93 per SF per month.

‍

Market Trends and Future Outlook:

The Inland Empire industrial market remains attractive to investors due to its strategic location and strong fundamentals. However, potential oversupply, signaled by the significant space under construction, and economic uncertainties present challenges.

‍

Sustainability and Resilience:

Incorporating sustainable practices and resilience strategies is essential as the industrial real estate landscape evolves. Developers are increasingly adopting green building practices to meet tenant demand and comply with regulatory standards. Flexible leasing terms are also crucial to accommodate shifting tenant needs amid economic fluctuations.

‍

The Inland Empire industrial market is poised for continued growth, but stakeholders must remain vigilant. Adopting sustainable and adaptable strategies is key to navigating future challenges and capitalizing on emerging opportunities.

‍

For a detailed analysis, refer to the full CBRE Q2 2024 report by clicking on the button below.