Riverside-San Bernardino Industrial Investment Forecast
Riverside-San Bernardino Metro Area, 2018 Outlook
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Fast-Growing Economy Generates Heightened Construction in Metro’s Eastern Half

Strong demand results in stout net absorption. With ample room for industrial expansion in the Inland Empire’s eastern sections, the metro continues to serve as a leading market for businesses seeking to establish or strengthen international trade based on its proximity to major U.S. ports. Robust demand prompted developers to add over 80 million square feet of industrial space in the past four years, along with pushing the 2018 completion sum to a cyclical high. Amazon and Monster Energy headline this year’s new supply with 1 million-plus square-foot facilities in Eastvale and Rialto, respectively. Construction will be most intense in the I-215 corridor through Riverside extending south into Moreno Valley. Considerable amounts of new space that are largely unleased will allow vacancy to climb in 2018, marking the second straight year the metro’s rate has eclipsed the national measure. Amid rising vacancy, the market records subdued rent growth compared with last year’s exceptional advancement, although the increase still remains similar to the national rate.

Wide array of options keeps local buyers interested. Riverside-San Bernardino’s ability to act as a national distribution hub underscored investor activity last year. In-state buyers should account for nearly all transactions this year as industrial assets offer investors opportunities to reposition their portfolios and capitalize on more favorable initial returns than other property types in Southern California. Class B space around the LA/Ontario International Airport remains highly sought after at cap rates in the mid-5 to 6 percent range. Large Class A distribution centers and warehouses along I-10 in Fontana attract a number of institutional investors. These assets typically net first-year yields in the mid-4 to 5 percent span.