2013 First Quarter Retail Update (04/16/2013)
04/16/2013 Inland Empire
Inland Empire Retail Update
In the first quarter of 2013, the Inland Empire retail market experienced improvement over the previous quarter, boosted by positive net absorption and a decrease in the vacancy rate. The region’s vacancy rate decreased this quarter to 10.6%, down 10 basis points from 10.7% last quarter. The overall Inland Empire market experienced 326,000 sq. ft. of positive absorption, with the bulk of this occurring in the West End submarket. The average asking high lease rate for retail space in the Inland Empire increased by one cent to $1.86 per sq. ft., though it continues to remain below average rents in neighboring counties.
The Inland Empire had two retail centers delivered to the market this quarter; 200,000 sq. ft. located at the Colonies in Upland and a 55,000 sq. ft. center located at the Mission at Village Lakes in Desert Hot Springs. Other Retail projects are currently in the pipeline and 2013 is expected to bring about several construction starts.
On average, the Inland Empire has witnessed 1.1% job growth for the last two years. According to CBRE Econometric Advisors, Inland Empire's employment is expected to grow by 1.7% over the next five years. The majority of this gain will be in the construction sector which is projected to grow by 4.4%. The professional and business services sector is also expected to grow by 3.0%. Retail sales for the region are forecasted to grow at an annual rate of 3.6% over the next five years.
The high average asking lease rate for retail space in the Inland Empire witnessed a one cent increase from the previous quarter to stand at $1.86 per sq. ft. The low average asking lease rate decreased to $1.51 per sq. ft., four cents under the $1.55 average recorded in the previous quarter.
Among the five major submarkets for Inland Empire, the South Riverside area ended the quarter with the highest average high asking lease rate at $2.02 per sq. ft. per month, while the High Desert area posted the lowest average high asking lease rate at $1.56 per sq. ft. per month. The East End and the West End submarkets fell between the spectrum at $1.83 and $1.93 per sq. ft., respectively. The Low Desert carries a slightly higher average rent of $1.96 per sq. ft. per month. Community centers in the Inland Empire continue to command the highest average asking lease rates. Asking lease rates have decreased 10.0% since the first quarter of 2010. However, rents are forecasted to grow 1.5% by the end of 2013.
The overall vacancy rate in the Inland Empire ended the first quarter at 10.6%. Year-over-year, retail vacancy has dropped 20 basis points. The vacancy rate is projected to remain within the 10.0% range throughout 2013 and heading into 2014. The housing market within the Inland Empire has started to gain traction, with that comes an increase in consumer spending thus giving retailers the confidence and sales to expand.
Submitted by – Kevin Aussef, Senior Managing Director – CBRE Ontario, CA and NAIOP IE executive board member and research foundation supporter -
The NAIOP Research Foundation is an industry leading think tank dedicated to conducting research assessing the trends, economic viability and needs of the built environment. The Foundation produces forward-looking studies and vital reports that identify future development opportunities, assess employment trends and reveal the vital role commercial real estate plays in the economy. The Foundation's research projects support developers, owners and others involved in commercial real estate to meet and exceed the needs and expectations of our communities, now and in the future.