Inland office market perks up

While no one will mistake it for the region’s industrial sector, the long-struggling Inland Empire office market is showing signs of life.

Vacancy fell to 16 percent during the first quarter of this year, down from 17 percent during the fourth quarter of 2014 and down from 19 percent year-over-year, according to Colliers International’s first quarter report on the Inland office market.

Net absorption of office space in Riverside and San Bernardino during the first quarter was 206,300 square feet, down from 172,620 square feet of absorption during the last three months of 2014.

All eight of the Inland region’s submarkets experienced positive net absorption during the first quarter, with Rancho Cucamonga recording the most – 69,200 square feet, according to Colliers

Rents remain low compared with Los Angeles and Orange counties, but they have remained consistent as the Inland market has struggled to recover from the recession.

The average rental rate for office space in the two-county region during the first quarter was $1.67 a square foot, about where it’s been every quarter for the past two years. The average asking rate during that time moved only once cent up down during that time, Colliers found.

The Inland Empire’s office market effectively ground to a halt when the recession hit in 2008, and it’s still trying to recover, with no one predicting much speculative development anytime soon. For now, the goal is to get the vacancy rate below 10 percent, at which point some “spec” might return to the market.

Currently, the Inland region has 20.5 million square feet of office space, about seven percent of the total office space in the greater Los Angeles market. Unlike the other Southern California submarkets, most of the Inland Empire’s office space – almost 90 percent – is located low-rise buildings, meaning structures of four stories or less, according to Colliers.