Introduction to the Inland Empire Industrial Market
Southern California’s Inland Empire continues to attract new leasing activity amid nationwide unease over tariffs and industrial space oversupply–but it’s not the red-hot pocket of activity it used to be.
Prologis has secured a new full-building lease with packaging company DesignWorx for a 78,418-square-foot building in Chino, Commercial Observer reported. The 60-month lease at 14628 Yorba Avenue is valued at approximately $4.3 million. DesignWorx plans to move into the new space in February, according to CO.
Current State of the Inland Empire Industrial Market
The Inland Empire, the United States’ most active warehouse and logistics hub, saw a dropoff in occupancy last quarter, according to CoStar. Tenants across the I.E. vacated 4 million square feet more than they moved into in the second quarter, marking one of the biggest quarterly occupancy losses of any industrial market in the country. The industrial vacancy rate in the Inland Empire is at a 15-year high of 8.5 percent, above the nationwide rate of 7.5 percent last quarter, according to CoStar.
Historical Context of the Inland Empire Industrial Market
The Inland Empire’s industrial market regularly saw vacancy rates of near zero and rampant speculative development from the pandemic up until the last year or so. Recent leasing activity, including Prologis’ latest deal with DesignWorx, should provide some hope that the I.E. will keep its crown as the U.S.’ leading industrial market. DesignWorx’s new home, for example, was on the market for just one month before it jumped on the property, according to CO.
Notable Leasing Activity in the Inland Empire
Last month, third-party logistics firm IDC Logistics locked down two lease deals for a combined 1.1 million square feet in the Inland Empire and Los Angeles County. The larger lease for 845,000 square feet in San Bernardino is the second-largest lease deal in the Inland Empire so far this year, per CO. Dedeaux Properties, which owns and manages 14 million square feet in the region, also recently inked a full 165,000-square-foot warehouse lease in Fontana to bring on logistics firm Pilot Air Freight as a tenant, according to CoStar.
Sales Activity in the Inland Empire Industrial Market
Beyond leasing, some industrial properties are also trading hands in sales. Bridge Logistics Properties, a subsidiary of Salt Lake City-based Bridge Investment Group, bought three industrial buildings in Fontana for $83.5 million, working out to about $250 per square foot. Prologis is the largest industrial property owner in the nation and in the Inland Empire, boasting about 83 million square feet in the I.E., according to CO.
Conclusion
The Inland Empire industrial market is experiencing a shift, with a drop in occupancy and an increase in vacancy rates. However, recent leasing activity, such as Prologis’ deal with DesignWorx, suggests that the market may still have potential for growth. As the largest industrial property owner in the nation and in the Inland Empire, Prologis’ activities will be closely watched.
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