Second Quarter 2008 West Inland Empire Industrial

Activity Continues To Slow In The Inland Empire Industrial Market

Sales and leasing activity remained low in the second quarter of 2008 (only 2.9 million SF), far below the average of 6 million SF of activity per quarter witnessed from 2004 to 2007. Net absorption turned strongly negative (-3 million SF), a rare occurrence in this market but a deepening of the trend witnessed last quarter which had -1 million SF of net absorption. Reasons for this slowdown include a sluggish economy, adjustment to above-average activity in previous quarters, continued increases in supply and higher operating costs brought on by higher gasoline and diesel prices.

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Quite a few projects finished construction this quarter: 10288 Calabash in Fontana (574K Avail), 14600 Bar Harbor in Fontana (244K Avail), 16142 Fern in Chino (227K Leased).

What is hurting this market is the rise in availabilities: Spring Industries moved out of 270K in Ontario and Wickes moved out of 572K in Rancho Cucamonga.

Things are going to be slow in the West Inland Empire industrial market for awhile. Gas prices are up, home prices are down and consumer spending is moving sideways.

The heyday of land flipping and spec building, those days are over and it is time to start touting the fundamentals - long term value, population growth, lack of space elsewhere.