AS INDUSTRIAL VACANCIES CLIMB, ASKING RATES FOR INDUSTRIAL REAL
ESTATE DIP
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 average rental prices for office, retail, and industrial real estate, and vacancy rates for office and industrial. New this year, this indicator tracks retail availability rate, sometimes called the availability index, which reflects vacant space immediately available as well as space currently occupied that is being marketed due to an upcoming lease expiration. Additionally, the net absorption of industrial real estate is tracked, which comprises the largest share of market space available in the region and is a key indicator of overall market health.[1]
TREND
Industrial real estate, which accounts for the vast majority of the total market share (77%), had a 7.1% vacancy rate in the fourth quarter of 2024. This represents an annual increase of nearly 2 percentage points, from 5.3% vacancy in the fourth quarter of 2023. The rapid growth of the logistics industry during the post-pandemic recovery, including the construction of warehouses, has resulted in increased availability of warehouse space, while the demand for warehouses in San Bernardino County has softened. Over the last decade, the industrial real estate vacancy rate has grown almost 4 percentage points, from 3.3% in 2015.
In the fourth quarter of 2024, office space, which accounts for 3% of market share, had a 7.9% vacancy rate, marking a decrease from 8.8% in the fourth quarter of 2023. Over the last decade, office vacancy rates have dropped 46%, from 14.7% in the fourth quarter of 2015.
The retail availability rate in the fourth quarter of 2024 was 6.5%. This new metric for the Community Indicators Report sets a baseline for trend analysis moving forward.
OFFICE VACANCY RATE DROPS AS INDUSTRIAL VACANCY RATE CONTINUES TO TICK UP
Office and Industrial Real Estate Vacancy Rates in Riverside-San Bernardino, 2015-2024 (Fourth Quarters)
The asking rent for office space increased a modest 1% over the past year. Over the past ten years, the asking rent for office space has increased 13%, from $1.83 per square foot in the fourth quarter of 2015, to $2.06 per square foot in the fourth quarter of 2024. Although the asking rent for industrial space decreased 22% from $1.48 per square foot in the fourth quarter of 2023 to $1.16 per square foot in the fourth quarter of 2024, it has increased 158% over the past decade. Retail asking rent in the fourth quarter of 2024 was $1.77.
OFFICE RENTS SEE MODEST INCREASE AS INDUSTRIAL RENTS DIP
Office, Retail, and Industrial Real Estate Average Asking Rents in Riverside-San Bernardino, 2015-2024 (Fourth Quarters)
GEOGRAPHIC COMPARISON
Inland Empire commercial rents are consistently more affordable than rents in L.A. and Orange County. In the fourth quarter of 2024, industrial rent in the Riverside-San Bernardino metro area was 19% less expensive than Los Angeles County, and 31% less expensive than Orange County. Office rent was 50% less expensive than Los Angeles County, and 28% less expensive than Orange County. Meanwhile, retail rent was 42% less expensive than Los Angeles County, and 31% less expensive than Orange County.
RIVERSIDE-SAN BERNARDINO METRO AREA RENTS REMAIN BELOW REGIONAL NEIGHBORS
Office, Retail and Industrial Real Estate Average Asking Rents, Regional Comparison, Fourth Quarter 2024
[1] Net absorption is the change in occupied square feet from one period to the next.