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High Desert homes in demand; prices inch up

     Demand is up for homes in the High Desert, but the supply isn’t keeping up, according to November real...

Article Date : 12/18/2009
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Industrial space grows faster than demand (Posted Date :Sunday, September 20, 2009)

High Desert lost as much occupied industrial space in first quarter of 2009 as it did in all of 2008

 Victorville’s Southern California Logistics Airport and Foxborough Industrial Park, Apple Valley’s North Industrial Zone, Hesperia’s “I Avenue” industrial area and Adelanto’s Gateway Logistics Center — along with a dozen other industrial parks — stand asevidence of that dream.

 There have been a couple of recent successes for these areas even in a down economy, with an official deal announced Thursday for Plastipak to lease a 231,000-square-foot site at SCLA. The company is expected to bring in some 200 jobs, according to Victorville officials.

 But in general the jobs haven’t followed as quickly as the square footage, with some projects that went up on speculation still waiting for tenants and a vacancy rate that dwarfs the Inland Empire’s as a whole, as developers have continued building more space than demand called for.

 The High Desert has lost as much occupied indust rial space in the first quarter of 2009 as it did in all of 2008, according to the second quarter report from Lee & Associates — even as a 1-million-square-foot warehouse was completed at SCLA onspeculation.

 On the one hand, if developers can afford to build and sit on the project for a while, it is less expensive for them to do so now with extremely competitive real estate and construction markets.

 “When the market does turn, they’ll be the first out of the gate to get the deal,” explained Rob Kurth, executive vice president for Lee & Associates.

 On the other hand, a glut of empty warehouses can give the impression of a ghost town and drive down prices for all local sites.

 The High Desertposted a 17 percent vacancy rate for industrial space at the end of the second quarter this year, which is 5 percent higher than the Inland Empire’s overall industrialvacancy.

 The number of empty warehouses in San Bernardino and Riverside counties is at its highest since 1994, skyrocketing from a low of nearly2 percent in 2005.

 A healthy vacancy rate is typically somewhere between 5 percent and 10 percent, according to Kurth.

 Rates below 5 percent mean users may not be able to find the space they need and could look to other markets.

 With rates above10 percent — particularly getting up into the high teens as they are now — landlords have to be willing to make large concessions in order to attract customers. These can range from demanding months of free rent to tens of thousands of dollars in building improvements to seal a deal.

 SCLA accounted for 76 percent of the High Desert’s vacancy rate for industrial buildings over 50,000 square feet as of the end of June, with the 1 million-square-foot warehouse completed this year accounting for a large chunk of that space.

 Plastipak is now taking over the majority of a 296,000-square-foot warehouse completed last year, reconfiguring it for its plastics manufacturing operations to bottle Dr Pepper Snapple Group’s product.

 Dr Pepper, however, is building its own 850,000-square-foot manufacturing and distribution center rather than taking over any existing space.

 While there’s been almost no movement at all on the larger industrial warehouses, which account for 73 percent of the area’s vacancy rate, Kurth said there has started to be some action again for smaller industrial units under 25,000 square feet. He said “mom and pop” businesses are taking advantage of the affordable market to move into larger buildings, planning for future growth.

 The bulk of the vacant smaller industrial space — some 33 percent — is in Adelanto. But an 8,600-square-foot industrial space on Alder Street in Adelanto was on the market for just a week before being snatched up, Kurth said, with the landlord offering an extremely competitive lease rate.

 “Because tenants have choices,” Kurth said, “it really comes down to rates and concessions.”

 Brooke Edwards may be reached at 955-5358

By : Daily Press
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