2010 Global Market Report - NAI Commercial Real Estate

Inland Empire (Riverside/ San Bernardino), CaliforniaLos Angeles, CaliforniaContactNAI Capital(Riverside)+1 951 346 0800NAI Capital(Ontario/San Bernardino)+1 909 945 2339NAI Capital(Temecula Valley)+1 951 491 7590Metropolitan AreaEconomic Overview2009Population2014 EstimatedPopulationEmploymentPopulationHouseholdAverage IncomeMedianHousehold IncomeTotal PopulationMedian Age4,189,7814,458,8271,321,430$74,095$55,13132The Inland Empire has suffered during the recession mainlydue to a strong development surge over the last 10 years.Residential foreclosures have subsided as median homeprices fell. Lease rates for all types of commercial propertydeclined, which increased absorption in a double-digitvacancy factor environment throughout the commercialspectrum.The good news is that the Inland Empire has returned to itshistorical position as the lower cost alternative to the LosAngeles basin. Affordable housing, low cost commercialspace, and a strong employee base are likely to encourageeconomic growth in the Inland Empire.The office market experienced a significant contractionduring the recession. Vacancy rates rose to unprecedentedlevels over the last two years causing highly aggressive baserental rates and concession packages to attract the InlandEmpire office user. With the exception of malls, retailvacancy rates in the Inland Empire exceed 10%. Althoughhigh, these rates are likely to remain constant or decreaseslightly over the next 12 months. Enticed by low lease rates,discount retailers, who have experienced an increase in salesduring the recession, are inquiring about additional space.The industrial market remains weak due to negativeabsorption and approximately three years of availableinventory proliferating throughout the Inland market inall size spectrums. The optimistic aspect is that thegap between buyers and sellers and landlords and tenantshas finally narrowed, which is stimulating transactions.Distressed property owners are moving product lateralwith the late 1980s market. With prices at a 15-year low,opportunity has been created for the investor looking topurchase at or below replacement cost.Private Equity Funds are taking to this market due to thetremendous upside potential of where they can buy now asopposed to where the product topped out during the heightof the market.ContactNAI Capital (Encino)+1 818 905 2400NAI Capital (West Los Angeles)+1 310 440 8500NAI Capital (South Bay)+1 310 532 9080NAI Capital (Commerce)+1 323 201 3600NAI Capital (Pasadena)+1 626 564 4800NAI Capital (Santa Clarita)+1 661 705 3550Metropolitan AreaEconomic Overview2009Population2014 EstimatedPopulationEmploymentPopulationHouseholdAverage IncomeMedianHousehold IncomeTotal PopulationMedian Age12,721,59212,341,9265,950,383$82,944$57,88735The entertainment industry, a primary component of themarket in Los Angeles, has weathered the current crisisquite well. The October 25th year-to-date box office receiptsincreased 7.3% from 2008. Offsetting the gains in entertainmentare losses in international trade. Total shipmentsthrough September at the Port of Long Beach decreased24.6 % from the previous year. In general, economicconditions in Los Angeles County remain weak. However,there is a bright spot as discount retailers, such as Big Lots,Dollar Tree, 99 Cents Only, and Wal-Mart, continue to expand.Concerns regarding future economic growth have keptdemand for commercial real estate in Los Angeles Countysubdued. Companies throughout Los Angeles are lookingfor ways to reduce lease expenses. For some, this meansvacating their existing space. This has led to higher vacancyrates for office, retail, and industrial space. Other companiesare asking for rent reductions. This, combined with highervacancy rates, led to lower lease rates in all three markets.Tight credit markets and an unwillingness to lend havenegatively impacted the number of sales transactions. Thenumber and dollar value of sales transactions declinedsignificantly compared with 2008 figures. The velocity ofsales transactions is expected to increase as owners shift toSBA financing.Higher vacancy rates, lower lease rates and tight credit havealmost eliminated new construction. Very little constructiontook place in Los Angeles County during 2009 and is notlikely to pick up in the near future. However, several newconstruction sites are slated for 2011.We have experienced a significant decline in lease rates andsales prices with some categories at lower levels than wehave seen for almost 10 years. However, with the currentincrease in activity, some improvement in credit lending andthe existing low prices in the market, we expect to see asignificant increase in lease and sale transactions in the next12 months.Inland Empire (Riverside/ San Bernardino) At A Glance(Rent/SF/YR) Low High Effective Avg. VacancyDOWNTOWN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIALBulk WarehouseManufacturingHigh Tech/R&DRETAILDowntownNeighborhood Service CentersSub Regional CentersRegional Malls$$$$$$$$$N/AN/AN/A29.4013.975.642.041.804.20N/A3.484.8015.00$$$$$$$$$N/AN/AN/A41.4049.7639.5115.4725.8013.44N/A45.0047.2442.00$$$$$$$$$N/AN/AN/A37.4126.8020.504.574.026.86N/A19.6026.2530.77N/AN/AN/A80.2%32.8%19.5%15.0%16.7%7.4%N/A10.5%11.4%2.8%DEVELOPMENT LAND Low HighOffice in CBDLand in Office ParksLand in Industrial ParksOffice/Industrial Land - Non-parkRetail/Commercial LandResidential (per acre)$$$N/A881,928.00153,932.00N/A403,846.00N/A$$$N/A1,033,057.00653,400.00N/A1,520,270.00N/ALos Angeles At A Glance(Rent/SF/YR) Low High Effective Avg. VacancyDOWNTOWN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)DOWNTOWN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIALBulk WarehouseManufacturingHigh Tech/R&DRETAILDowntownNeighborhood Service CentersCommunity Power CenterRegional Malls$$$$$$$$$$$$N/A18.009.8124.7514.716.000.592.404.687.0810.803.2418.00$$$$$$$$$$$$N/A52.5444.3564.3777.4054.3229.8817.3612.6045.2441.6837.0025.00$$$$$$$$$$$$N/A34.1921.7441.0132.6725.206.726.817.0032.6125.3123.8524.46N/A13.7%12.2%69.8%14.80%12.7%9.2%6.8%11.6%4.6%6.8%7.6%3.3%DEVELOPMENT LAND Low/Acre High/AcreOffice in CBDLand in Office ParksLand in Industrial ParksOffice/Industrial Land - Non-parkRetail/Commercial LandResidential$$$$4,375,000.001,066,666.001,034,031.00N/A1,306,801.00N/A$$$$10,937,500.003,849,206.003,120,000.00N/A3,975,000.00N/A2010 Global Market Report ■ www.naiglobal.com74