2012 Global Market report - NAI Global

Inland Empire (Riverside/San Bernardino), California
Los Angeles, California
Contact
NAI Capital
(Riverside)
+1 951 346 0800
NAI Capital
(Ontario/San Bernardino)
+1 909 945 2339
NAI Capital
(Temecula Valley)
+1 951 491 7590
NAI Capital
(Palm Desert)
+1 760 346 1566
Metropolitan Area
Economic Overview
2011
Population
2016 Estimated
Population
Employment
Population
Household
Average Income
Median
Household Income
Total Population
Median Age
4,316,573
4,683,568
2,004,775
$76,590
$60,366
31
As measured by unemployment numbers, the Inland Empire
suffered the most during the recent recession. Even now,
unemployment in the Inland Empire remains high. As of
September 2011 the unemployment rate was at 13.4%. This
is below the 15.1% peak but well above the area’s average
unemployment rate.
High unemployment has truly hurt the Inland Empire’s office
market. Vacancy rates for Class A space exceed 25%. The
rate for Class B space is lower, 17.2%, but still above its
average rate. The lack of demand for Inland Empire
office space has put downward pressure on lease rates.
Furthermore, high vacancy rates and low lease rates have
halted new construction. We estimate that only 46,000 SF on
new office space came on-line in 2011.
The Inland Empire’s industrial market is slowly improving.
Vacancy rates are below 10% and lease rates are
strengthening. A significant portion of cargo from the Port
of Long Beach is transported and warehoused in the Inland
Empire. As world trade improves, we expect conditions in the
Inland Empire’s industrial market to improve. Furthermore, the
big box distribution centers (350,000 SF and above) have
surpassed absorption levels of 2007, with existing inventory
showing a sub-3% vacancy factor. The reemergence of the
“Institutional Developer” seeking large industrial land sites has
been prevalent throughout 2011 with the common statement
being made that we can’t get the big boxes up and vertical
quick enough based on the brisk absorption within the Inland
Empire marketplace.
The Inland Empire’s retail market remains weak. Vacancy
rates for community and neighborhood retail centers are
above 10%. Vacancy rates for the area’s malls are lower,
7.3%, but are high compared to historical numbers. High
unemployment and weak consumer spending will likely keep
conditions in the retail market subdued.
Contact
NAI Capital (Encino)
+1 818 905 2400
NAI Capital (West Los Angeles)
+1 310 440 8500
NAI Capital (South Bay)
+1 310 532 9080
NAI Capital (Commerce)
+1 323 201 3600
NAI Capital (Pasadena)
+1 626 564 4800
NAI Capital (Santa Clarita)
+1 661 705 3550
Metropolitan Area
Economic Overview
2011
Population
2016 Estimated
Population
Employment
Population
Household
Average Income
Median
Household Income
Total Population
Median Age
12,834,862
12,953,100
6,534,423
$87,692
$61,324
34
Los Angeles County has the largest economy in the five
county Los Angeles Basin. Its 5 million strong civilian labor
force is larger than the other four counties combined.
Unfortunately, 12.2% of that labor force was unemployed
as of September 2011. Additionally, Los Angeles’ labor force
shrunk recently as companies and employees left the area
for greener pastures in other states.
In terms of jobs, Los Angeles is dominated by service jobs.
The first three largest sectors are trade, transportation and
utilities, employing approximately 737,000 people. The
second largest sector is government. With the numerous
budget problems in California we expect the government
sector to shrink in the future. On a positive note, the third
largest sector is education and health services which we
forecast to grow. Demand for education increases during
times of high unemployment as individuals acquire more
human capital. Additionally, as the population ages we
expect demand for health services to increase. While not in
the top three, leisure and hospitality, the industry for which
Los Angeles is famous, remains healthy.
Conditions in the office market remain soft. High unemployment
has significantly impacted Los Angeles’ office market.
Vacancy rates for Class A and Class B office space remain
elevated while lease rates remain low. Excess supply and
little demand for office space have limited new construction.
We estimate that only 1,000,000 SF of new space came
on-line during the first nine months of 2011.
Los Angeles’ industrial market is starting to rebound due in
large part to increased activity at the Port of Long Beach. A
strengthening import/export market will continue to provide
relief to this sector. On the other hand, onerous regulation
and excessive costs will continue to cause businesses to
move out of the area. In general we expect the industrial
market to improve but the improvement will be mitigated
due to government regulations.
Some downward pressure remains in the retail market as
vacancy rates for this sector remain high and lease rates
remain low. A lack of consumer spending and a shift to
internet shopping are negatively impacting the retail market.
The recent demise of Borders underscores the impact that
the internet is having on traditional brick and mortar stores.
Unfortunately, we expect this trend to continue.
Inland Empire (Riverside/San Bernardino) At A Glance
(Rent/SF/YR) low High effective avg. Vacancy
doWntoWn offIce
New Construction (AAA)
Class A (Prime)
Class B (Secondary)
suburban offIce
New Construction (AAA)
N/A
N/A
N/A
$ 12.00
N/A
N/A
N/A
$ 32.45
N/A
N/A
N/A
$ 22.54
N/A
N/A
N/A
59.80%
Class A (Prime)
Class B (Secondary)
IndustrIal
$
$
9.00
1.44
$ 33.26
$ 208.71
$ 23.40
$ 18.43
25.50%
17.20%
Bulk Warehouse
Manufacturing
High Tech/R&D
retaIl
Downtown
$
$
$
2.04
1.80
1.80
N/A
$ 31.20
$ 12.00
$ 19.20
N/A
$
$
$
4.22
3.92
4.07
N/A
9.10%
9.30%
8.80%
N/A
Neighborhood Service Centers
Community Power Centers
$
$
4.04
3.00
$ 48.00
$ 108.00
$ 16.54
$ 17.48
12.70%
10.80%
Regional Malls
$ 12.00 $ 45.00 $ 17.86 7.30%
deVeloPment land Low/Acre High/Acre
Office in CBD
Land in Office Parks
$
N/A
786,956.00
N/A
$ 1,200,000.00
Land in Industrial Parks
Office/Industrial Land - Non-park
Retail/Commercial Land
Residential (per acre)
$
$
108,054.00
N/A
105,454.00
N/A
$
$
898,213.00
N/A
105,454.00
N/A
Los Angeles At A Glance
(Rent/SF/YR) low High effective avg. Vacancy
doWntoWn offIce
New Construction (AAA)
Class A (Prime)
Class B (Secondary)
suburban offIce
New Construction (AAA)
Class A (Prime)
Class B (Secondary)
IndustrIal
$
$
$
$
$
N/A
27.00
18.00
30.00
24.00
18.00
$
$
$
$
$
N/A
40.75
44.35
60.00
60.00
48.00
N/A
$ 33.32
$ 20.96
$ 30.92
$ 30.61
$ 24.70
N/A
15.80%
12.80%
52.90%
17.60%
13.60%
Bulk Warehouse
Manufacturing
High Tech/R&D
retaIl
$
$
$
7.00
8.00
9.00
$
$
$
12.00
14.00
18.00
$
$
$
6.30
6.22
6.27
7.20%
8.80%
8.90%
Downtown
$ 1.50 $ 120.00 $ 24.31 5.20%
Neighborhood Service Centers
Community Power Center
Regional Malls
$
$
$
9.30
9.00
12.00
$
$
$
72.00
63.00
65.00
$ 23.48
$ 21.74
$ 19.93
7.00%
6.90%
4.00%
deVeloPment land Low/Acre High/Acre
Office in CBD
Land in Office Parks
$
N/A
533,333.00
N/A
$ 18,867,924.00
Land in Industrial Parks
Office/Industrial Land - Non-park
$ 46,948.00
N/A
$ 8,903,467.00
N/A
Retail/Commercial Land
Residential
$ 452,060.00
N/A
$ 11,060,606.00
N/A
2012 Global Market Report n www.naiglobal.com 83