Second Quarter 2008 East Inland Empire Industrial Report

Industrial Vacancy Rate Continues to Creep Upward, Sales and Leasing Activity Dwindles

Sales and leasing activity in the first quarter totaled 1.5 million SF, below the 2007 quarterly average of 2.5 million SF. In previous quarters, sales and leasing activity in the East Inland Empire was characterized by a handful of very large deals (400,000 SF+). These large deals were noticeably absent this quarter, resulting in low sales and leasing activity and also negative absorption for the region.

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Several new projects broke ground this quarter in the East Inland Empire, and several that were marketed as "under-construction" have been downgraded to planned.

Honestly, I don't know why people are building on spec anymore.

As this credit/ housing bubble thing continues to unwind, demand for these buildings remains shaky at best. And with gas prices skyrocketing to the moon, shipping consumer goods to the middle of a desert and back again doesn't make as much sense as it used to.

And forget about the 64 really really large competing projects that are currently available in the East Inland Empire. Maybe they will be gone by the time your building is completed, but this 64 number looks just as likely to go up than not.

Now don't get me wrong, some people are still making money in the development business.

There is a 1.3 Million SF building in Perris (Yes another one) that is currently under construction and is fully leased (thanks to some of my guys) but that was dirt when the deal was done, so not really a spec building.

More of an absorption bomb waiting to happen (Q4 est. completion date).