Vacancy Rates Continue their Steady Decline
Changes in commercial real estate vacancy rates, rents, and net absorption reflect the health of the market, as well as opportunities for business expansion. Lower vacancy rates, increasing net absorption, and increasing rents can signal a need for investments in new facilities, thus stimulating construction and related building activities. This indicator tracks rental prices and vacancy rates for office, retail and industrial real estate. The net absorption of industrial real estate comprises the largest share of market space available in the region and is a key indicator of overall market health.
How is San Bernardino County Doing?
Industrial rents in the Riverside-San Bernardino metro area are back to pre-Recession levels while vacancy rates, though increasing slightly from 2013 to 2014, continue an overall downward trend:
- Industrial real estate, which accounts for the vast majority of the total market share (77%), had a 3.3% vacancy rate in the fourth quarter of 2015.
- This represents a decrease of six percentage points since the fourth quarter of 2008’s peak of 9.4% vacancy.
- Following a long period of relative stability, there was a 15% increase in the asking price of industrial rent from $0.39/square foot in the fourth quarter of 2014 to $0.45/ square foot in the fourth quarter of 2015.
- There was a 136% increase in industrial net absorption between the fourth quarters of 2014 and 2015.
Retail vacancy rates and rents remain steady:
- In the fourth quarter of 2015, retail space, which accounts for 18% of market share, had a 9.8% vacancy rate.
- Vacancy rates have decreased two percentage points from the peak of 11.8% vacancy in the fourth quarter of 2009.
- At $1.89/square foot, retail rent did not change between the fourth quarters of 2014 and 2015, and has not changed significantly since the fourth quarter of 2011. Office vacancy rates have declined while rents increased:
- In the fourth quarter of 2014, office space, which accounts for 4% of market share, had a 14.7% vacancy rate.
- This represents a steady decrease of almost ten percentage points since the peak of 24.3% vacancy in the fourth quarter of 2009.
- Between the fourth quarters of 2014 and 2015, office rents increased 5% (from $1.75/square foot in the fourth quarter of 2014 to $1.83/square foot in the fourth quarter of 2015). Across all categories of commercial real estate, rents in the Riverside-San Bernardino metro area are comparatively low:
- In the fourth quarter of 2015, on average, industrial rent in Los Angeles and Orange counties was 61% more expensive than comparable space in the Riverside-San Bernardino metro area; office rent was 44% more expensive on average; and retail rent was 18% more expensive on average.