MARKET SUMMARY - 2nd quarter 2009
Corporate consolidations and tenant move-outs have combined with record levels of new office construction to create some of the highest office vacancy levels in the history of the Inland Empire region.
As of the end of the 1st Quarter 2009, San Bernardino and Riverside Counties’ office vacancy level exceeded 23% on a base of over twenty-three million square feet.
Since mid-year 2007, almost 4.5 million square feet of new office space completed construction representing an approximate 25% increase to the base of office space in the region. This new supply entered the market just as both the regional and national economies began their slide into the current economic slowdown.
In 2008 alone, the Inland Empire lost over 32,000 jobs and the office market gave back space with over 115,000 square feet of negative office absorption. This negative job growth was the first time Riverside and San Bernardino Counties did not post positive job growth since 1964.
Markets such as Corona and Ontario saw the greatest number of new office buildings built. These cities’ location on the western edge of the Inland Empire had been experiencing some of the region’s strongest growth due to their close proximity to both Los Angeles and Orange County. Now, their newest Class A product has vacancy levels exceeding 40%.
Positive news however, is on the horizon. With the beginning signs of a strengthening economy, the Inland Empire’s current vacancy levels offer advantages for those tenants who have delayed corporate relocations to the region. Significant opportunity exists due to the number of high quality buildings available to accommodate future expansions in this region.
In addition, these opportunities are available at economics that offer attractive concession packages and low rental rates that when combined with the region’s competitive wage advantages that a large, well educated, available labor pool willing to work for wages 5% to 15% lower than other job markets closer to the coast – Southern California’s Inland Empire offers forward looking companies reduced occupancy and labor costs that positively impact long term corporate profitability.
