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Region's industrial market remains strong

The Inland Empire's industrial real estate market was still strong at midyear, but the office market has lost some of its steam, according to a report released in July by commercial real estate firm Grubb & Ellis Co.

The industrial market's strengths are threefold, the report said. Vacancies remain below 5 percent, and absorption and construction levels are up from a year ago.

There were 24.2 million square feet of industrial space under construction in the second quarter, up from 21.9 million square feet a year ago. Absorption, meanwhile, totaled 11 million square feet for the first six months of the year, an increase of 2 million square feet over the same time period in 2006.

The Inland office market has lost some of its steam. The vacancy rate was 4.8 percent, compared with 3.8 percent 12 months earlier, but Grubb & Ellis said that merely reflects new inventory being added to the market.

"This is the 12th consecutive quarter that the market wide industrial vacancy rate has been under 5 percent," said Grubb & Ellis Vice President Mary Sullivan. "For users in need of state-of-the-art warehouse and distribution facilities in the Southern California market, the Inland Empire is the best -- and maybe only -- game in town."

Within the region, Grubb & Ellis said, some submarkets have shown higher vacancy rates because of large "spec" projects that aren't spoken for when they come online.

However, said Ron Washle, senior vice president, the vacancy in these submarkets will be a short-term phenomenon because of steady demand.

Redlands-based economist John Husing said the strength of the industrial market is its connection to international trade. He said booming business at the ports of Los Angeles and Long Beach has meant the need for more distribution space.

"It seems almost as soon as we build it, (industrial space) is being occupied by companies," Husing said.

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