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    Inland Empire Renewals Back in Vogue for 2015
    December 15, 2014


    Click here for orginal article 

    INLAND EMPIRE, CA—In part one of this two-part exclusive series, we reviewed the top industrial Orange County trends for 2015. In part two, Franc Geraci, an EVP in Voit Real Estate Services’ Inland Empire office, reviews the future for the Inland Empire’s industrial market, noting that things are “simply booming.”

    With 5.7% vacancy and 15-16 million square feet of speculative development under construction, industrial product was the leader coming out of the recession, and remains the leader in terms of desired product type both for users looking to consolidate and institutional investors looking to place capital, Geraci says.

    Emerging trends in this market include:

    Internal Expansion:

    One major indicator that the health of the Inland Empire market is restored is a recent influx of companies already in the Inland Empire that are now growing and expanding, explains Geraci. “Companies such as Amazon, Continental Tire, Target, Pier 1, Ashley Furniture, K&N Engineering, Restoration Hardware, UPS, and Dorel USA have expanded their footprints in the Inland Empire in the past 12 to 24 months.”

    Further, companies already located in the Inland Empire continue to acquire additional buildings in the market as an alternative to leasing, he explains. Office Star Products, for example, recently purchased a third industrial building in Fontana, CA, while Chinese company PengCheng Aluminum, which already owns 1.5 million square feet in Ontario and Fontana, recently purchased a third 600,000 square-foot industrial building in Riverside for its own occupancy, he explains.

    Renewals Back In Vogue

    Today’s industrial tenants are ready to renew, says Geraci. “Over the past four to five years, industrial tenants with a near-term lease expiration would take the time to price properties further east than their current location and return to the landlord to negotiate against those lower rates.”

    Alternatively, he says, “today’s tenants are simply choosing to renew and pay an increase in rent instead of disrupting their business with a relocation.”

    One example he points to Prologis’ portfolio, which has been kept at a 98% occupancy this part year. And another client Voit works with, Shea Properties, has renewed half of its two-million-square-foot industrial park in Ontario without experiencing any loss or vacancy.

    E-Commerce Moved In and Ready

    Another trend to watch for 2015 includes e-commerce and same-day/next-day delivery companies that didn’t exist before recession, which Geraci says, are now in the Inland Empire and absorbing astounding amounts of square-footage.

    Amazon, for example, has grown from no presence in the market in 2011, to now encompassing six million square feet of space in the cities of San Bernardino, Redlands and Moreno Valley, California.  “It is expected that E-commerce will be a big driver of future absorption of bulk-space, perhaps at the expense of some retailers who will not survive in the new era of mobile commerce.”
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