SAN BERNARDINO, CA-The Inland Empire, and more specifically San Bernardino County, is leading the country in not only industrial investment but also in overall recovery. So says Darla Longo, vice chairman of CBRE, who, over the last 12
months, has leased and sold (in the Inland Empire alone) more than 12.5 million square feet totaling more than $635 million.
GlobeSt.com: Can you describe the state of the Inland Empire industrial investment market and what
does the average deal look like today?
Longo: A couple of years ago, as US markets finally found the road to economic rehabilitation, the Inland Empire emerged as a national leader in lease recovery. The turnaround was driven by leasing agreements with large tenants in buildings in excess of
500,000 square feet. With an acceleration of rents, capital markets identified the Inland Empire as one of the main drivers in the logistics supply chains for the Western US.
A deal we just closed in Fontana, CA is a good example. We closed a 600,000-square-foot, 30-foot clear ESFR building that ended up trading at slightly below a 5 cap rate. The deal’s success can be explained with the well-known real estate mantra, “location location location”—it was a brand new state-of-the-art building located at what we refer to as “main and main” in the
city of Fontana for approximately $70 a square foot. Right now the Inland Empire, and more specifically San Bernardino County, is leading the country in not only industrial investment but also in overall recovery. Cap rates have significantly compressed and we’re even experiencing a lot of activity in class B industrial buildings that have been trading in the 5.5% to 6.5% cap range.
GlobeSt.com: What firms are most active right now in the area?
Longo: We have seen TA Associates Realty and Industrial Income Trust make a lot of investments throughout the Inland Empire. Other active players include KTR Capital Partners and LaSalle Investment Management out of Chicago. But significantly, a lot of investment flows from groups already active in San Bernardino County, such as Hillwood. They have been both an active buyer as well as seller of industrial buildings in the area. The Inland Empire is now number one on every
institutional buyer’s list. Previously the spotlight was pointing elsewhere—now we’ve become the darling of the country.
GlobeSt.com: How does the region rank on a national basis?
Longo: Buildings built in the Inland Empire are the most state of the art industrial facilities throughout all of the country. They feature high classified ESFR sprinkler systems, minimum 30’ clear heights and excess trailer storage. These are extremely
marketable features that demonstrate how we are so far ahead of the rest of the country. Our industrial base typically does not consist of the old and outdated buildings; some owners are looking to reconfigure some of the older manufacturing buildings to ensure they are state of the art.
GlobeSt.com: What are some of the drivers for major corporations locating to the Inland Empire?
Longo: Proximity to the Ports of Los Angeles and Long Beach is invaluable, and right now this type of logistical space is limited. Technology has advanced; companies need to move to the Inland Empire if they want state-of-the art facilities and trailer storage. If you look at the roster of tenants active in the region, it’s the who’s who of big name industry. For example, Nike brings their goods into the warehouse and would then ship to Target’s and Wal-Mart’s distribution buildings. Most
companies want to locate in Inland Empire because that’s where a majority of their clients and customers are. Businesses can break-down and deliver-down to warehouses located just beyond their own backyard. Locating in the Inland Empire ups-the-ante by offering unique logistical synergies.
GlobeSt.com: Why is the area known as an Inland Port and is the Panama Canal a threat to the
Longo: When a container comes into port, they offload and truck out to the Inland Empire. After this one-way delivery, our two intermodal yards become extremely valuable to truckers that understand an empty truck is a profitless truck. Because Inland Empire is a market teeming with clients, truckers can pick up another load-out for the return trip. That’s why we’re an inland port for Los Angeles. We have the intermodal yards, proximity to ports, and over 400-million-square-foot
industrial base. There is a significant and beneficial synergy created just by the amount of companies that are out here today. Our two intermodal yards are strong drivers for companies that understand this logistical tactic.
The Panama Canal has become less of an issue predominantly because the container ships have expanded in size and the largest ships cannot go into the Panama Canal. The volume at our ports has stabilized and continues to grow. Most experts report that they don’t see it as a huge impact on Southern California.
GlobeSt.com: What are the additional advantages to doing business in the Inland Empire?
Longo: I would say that San Bernardino County is one of the most proactive counties for business in California; and this, along with the amount of land available for growth, makes the area extremely advantageous. The County is extremely attuned to business and opportunities for growth—even in a national context. I tell tenants that the reason to locate in San Bernardino County and the Inland Empire as a whole is that it is a proven port entry. We have a significant balance of corporations, some of the lowest cost labor and affordable housing. If you move out here you can also afford to live out here. Plus we have the lifestyle. The beaches, desert, and mountains are within an hour drive. It’s an incredible draw for anyone.