Sunset aerial view of the industrial core of downtown Rancho Cucamonga, California, USA. By Matt Gush @ Shutterstock.com
California’s “Inland Empire” region is the center of the logistical orbit for the Western United States and perhaps the entire country. Warehouse vacancy rates in the region can mean something to the economy. Liz Young reports in The Wall Street Journal that vacancy rates are rising in the Inland Empire for the first time in several years. She writes:
Logistics companies are finding something in Southern California they hadn’t seen in several years—empty warehouse space.
One of the tightest industrial real-estate markets in the country is showing signs of loosening, industry experts say, as soaring rents, limited empty space and plummeting import volumes drive companies to look elsewhere for warehouses.
The warehouse vacancy rate in a logistics-heavy region called the Inland Empire jumped to 3.8% in the second quarter from 1.2% a year earlier, according to real-estate services firm Savills. That is still below the nationwide vacancy rate of 4.8% but a sharp reversal from a yearslong contraction that left one of the country’s busiest warehousing markets effectively full.
More warehouse space became available during the past quarter than was leased, the first time that has happened in the Southern California market in two decades, said Mark Russo, head of industrial research at Savills.
“We’re seeing a cooling and normalizing of demand levels in Southern California, particularly Inland Empire, at the same time that a significant amount of new supply is hitting the market,” Russo said.
The uptick in warehouse vacancy in the region comes as the industrial real-estate market nationwide is cooling off after three years of feverish leasing and development driven by skyrocketing imports of goods to meet strong e-commerce demand during the pandemic.
U.S. trade by value this year has been wavering, with overall imports down 4% in the first half of the year, and the impact has been hitting especially hard in Southern California, a major gateway for inbound trade flows, particularly goods from China.
The ports of Los Angeles and Long Beach, which feed goods into the region’s sprawling warehousing operations for distribution in Southern California and across the country, handled about 1.3 million fewer containers, measured in 20-foot equivalent units, in the first six months of this year compared with the same period in 2022, according to port figures.
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