Expanding online retailing has driven up the demand for warehouse space across the country, but nowhere as much as in the Inland Empire, according to new data from CBRE.
More than a fifth of the nation’s largest lease deals in 2019 involved San Bernardino and Riverside county properties, the commercial brokerage reported Monday. Of the 100 biggest deals — based on the buildings’ square footage — Inland Empire logistics operators signed 21 leases for 17.5 million square feet.
That list includes industrial buildings ranging in size from 598,000 to 1.4 million square feet. One of 2019’s biggest new tenants is Nordstrom, which leased a 1 million-square-foot warehouse in Riverside’s Hunter Park area.
The second-largest market, in central Pennsylvania, saw 7.5 million square feet of space leased last year for eight properties.
E-commerce-related logistics operators drove up lease demand for warehouses in 2019, along with a sharp uptick for food and beverage distribution sites as retailers beefed up their home-delivery operations.
The Inland area was at the top of a similar study a year ago and has been a leading market for longer than that, said Kurt Strasmann, executive managing director for CBRE’s Southern California operations.
“It’s amazing that the market continues to thrive after five years of just unbelievable development and absorption,” Strasmann said. “It proves that the Inland Empire is the most dynamic region in the country.”
The region’s proximity to Southern California’s ports and 20 million consumers within a 60-mile radius are key to the region’s distribution dominance.
Strasmann said CBRE’s research found that half of all the merchandise shipped from Asia to the ports of Los Angeles and Long Beach do not travel any farther than Phoenix before someone buys it.
Added to the mix is the economic infrastructure of the region, which includes a workforce of about 141,000 Inland Empire workers employed in logistics-related jobs in December, according to state data. With some 73,000 people as listed as unemployed, the workforce still has room to expand.
“The business infrastructure is mature and it’s deep,” Strasmann said. “It’s all of it, and a labor pool is a big part of that. The Inland Empire is basically five years ahead of the rest of the market.”
Most of the warehouses CBRE studied nationwide are newly built and are considered “big box” facilities, with at least 500,000 square feet of space. The runner-up corridor in Pennsylvania carries goods primarily between the New York City ports and the Midwest and mid-south locations such as Tennessee.
The other top markets for leased square footage among the top five were Memphis, Dallas-Fort Worth and Atlanta.
Locally the vacancy rate in the fourth quarter of 2019 was 4.1%, with very few large vacant warehouses in western communities such as Eastvale, Chino and Ontario.
More than 19 million square feet of new space was under construction as the year ended. Almost one-third of the owners of those warehouses have already arranged leases with users, and the average rent was 7% higher than it was a year ago.
The average rent of 61 cents per square foot means the operator of 500,000-square-foot building is paying a monthly rent of $305,000.
CBRE reported that, among the 100 largest industrial property deals arranged in 2019, third-party operators signed leases for 40 of them and 22 were leased by e-commerce companies.
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