Strong Rent Growth As Space Remains Scarce
- Industrial asking rents in the Inland Empire increased $0.03 in the second quarter to stand at $0.68 per square foot (PSF) triple net (NNN). Rents have increased over 15% in the past twelve months. Landlords continue to be bullish on rates as vacancy rates continue to tighten.
- The vacancy rate fell 30 basis points this quarter to end at 3.4%, which is the lowest rate on record for this region. There was below average construction completions this quarter leading to a falling vacancy rate.
- Construction completions this quarter totaled 3,260,400 square feet this quarter, which is below the 5.4 million square feet typically added per quarter. 25.5 million square feet still remains under construction, which will increase the industrial base by 4.8% when it is completed.
There is roughly 14 million square feet set to be delivered in the next six to eight months which may lead to increases in the vacancy rate. One fifth of this amount is already pre-leased, leading to positive net absorption once it is completed.
Despite the potential for rising vacancy rates in future quarters, rents are expected to remain high as industrial demand, especially for larger and more modern industrial space, remains scarce.
Economic headwinds along with threats of an ongoing trade war and concerns of a southern border, remain background noise to an industrial market seeing record-low vacancy rates and record-high asking rates.