Property performance improved meaningfully with both vacancy and concessions trending lower in 2011. Asking rents ticked up 2.7 percent to $1,084 per month during that span. Furthermore, the 6,400 fewer jobs recorded during the first half of 2011 was offset by the hiring of 29,000 workers over the final two quarters. These gains supported a 29.5 percent increase in deal flow to 57 sales. However, the prevalence of small acquisitions caused a 13.2 percent dip in dollar volume to $500.5 million last year. New apartment completions, as well as permits issued, were the lowest annual total on record in more than 15 years.
The Inland Empire will follow economic growth patterns more reflective of national trends through 2012 and into the future. It will not be returning to the iconic growth that characterized the region from the early years of the past decade up to 2007, when the last notable expansion firmly cemented the metro area as one of the nation's top economic engines of the time. As the region continues to mature, with vast swaths of land developed over the past decade for infrastructure, housing and distribution centers, one of its key growth drivers, construction, is apt to remain in neutral through the decade, especially in light of diminishing available land supply. Job growth will come from increased port activity to the west, however, which served as a catalyst for the absorption of millions of square feet of industrial space in 2011.
As consumer spending ramps up in 2012, and more so in 2013, trade employment will further benefit, lifting the Inland Empire. The Port of Los Angeles generates more than 830,000 jobs throughout Southern California and $35 billion in annual wages and tax revenues. Riverside is one submarket that will excel in job growth, with the opening of Home Depot and Smuckers industrial facilities, two of the largest in the country. Long term, the Coachella Valley, home to the desert communities of La Quinta, Palm Springs, Palm Desert, Indian Wells and others, stands to gain economically as land supply there remains more abundant for logistics expansion, while gaming and tourism will rebound on renewed national optimism.
Several factors will continue to drive overall demand in the Inland Empire in 2012: minimal new multifamily construction, asset pricing well below replacement cost, attractive interest-rate to cap-rate spread and the relative affordability of the region compared to other Southern California submarkets.
— Alex Mogharebi, partner, Hendricks & Partners’ Ontario office