Inland Empire, Calif. – Avison Young has released its Third Quarter 2023 Industrial Market Report for the Inland Empire, the Southern California region that includes Riverside and San Bernardino Counties. Total vacancy in Q3 2023 registered at 4.6% which is up from Q3 2023 when it was 3.5%.

“The Inland Empire industrial market is considered one of the most sought-after markets for industrial real estate, but activity has been slowing down. One reason is that consumers have changed their spending habits, moving from purchasing goods to purchasing services and occupiers are no longer moving goods at the same rate during the pandemic years,” said Erick Parulan, Senior Analyst - Market Intelligence with Avison Young.”

He noted that many occupiers who adopted a “just-in-case” space model during the pandemic have now been relinquishing their unused space which has pushed sublet availabilities to levels never seen in the market. The good news is that there is still some activity throughout the market stemming from large ecommerce and logistics occupiers.

“There has been a notable slowdown for both industrial leasing and sales in the Inland Empire,” said Cody Lerner, Principal with Avison Young. “Occupiers are putting plans on hold as there is a significant amount of uncertainty right now locally as well as globally.”

Cap rates are also on the rise in the Inland Empire. Third quarter 2023 saw cap rates for industrial space at 5.1% on average, compared with 3.9% in Q3 2021. Investment sales continue to decline, with sale prices registering at $261.61 per sf, and sales volume registering at $2.73 billion.