Strong Economy Boosts Office Market in the Inland Empire
- Sep 10, 2018
The Inland Empire’s office sector has performed well of late, as moderate absorption and little new construction has pushed down the vacancy rate. However, the metro’s warehouse and logistics-focused economy limits growth of the office segment.
The unemployment rate dropped to 3.7 percent—the lowest level on record— as nearly 50,000 new jobs were added in the 12 months ending in April. Half of them were in the trade, transportation and utilities and professional and business services sectors. A continuous population shift from Los Angeles to San Bernardino and Riverside will boost the area’s industrial market, while an uptick in medical office building construction will make room for more health services jobs. While the total number of office-using jobs is on par with pre-recession trends, they account for only 14.0 percent of the area’s employment pool.
The area is in need of infrastructure investment to maintain current growth trends. Riverside County is set to receive millions in state money for more than 90 road improvement and related projects.
No major office projects were completed over the past six quarters and a mere 25,000 square feet is due for delivery by year’s end—the lowest level in almost two decades. As a result, the metro’s vacancy continued to decline, reaching 12.0 percent in May, and is likely to keep going down in the coming quarters. Investment in the office sector has also hit a wall, as transactions went down 90 percent year-over-year in the second quarter of 2018.