Q1 2023 Industrial Market Outlook – Inland Empire
The Inland Empire’s industrial market continued to notice the increase in construction shaping up from the impact of demand caused by the pandemic and supply chain challenges that are now a distant memory. With the economy charging along at a different pace now, the supply of new warehouse and distribution space has caught up with demand. While the vacancy rate in Q1 2023 registered a low 2.8%, it is a full percentage point higher than the previous quarter and 160 bps above a year ago. Developers added 8.6M square feet of completed construction to the market in Q1 2023. With solid demand and rents rising, developers continued building new projects. More than 30.9M square feet of industrial space was under construction at the end of Q1 2023.
TRENDS TO WATCH
The leasing volume of industrial space outpaced completed construction for years as developers fought to keep pace with demand. This quarter, for the first time since the buildup during the “Great Recession” completed construction exceeded leasing volume; 8.6M square feet versus 6.7M square feet, respectfully. With completed construction totaling 28M square feet over the past five quarters and net absorption at 17.3M square feet over the same timeframe, construction finally caught up with demand in 2023.