January 29, 2016 Comments Off on Connecting With: CBRE’s Joe Cesta on What’s Moving the Market Views: 761 California News, Inland Empire

Connecting With: CBRE’s Joe Cesta on What’s Moving the Market

Connect Media asked CBRE’s Inland Empire leader Joe Cesta to share insights on the market. Here are his responses to our three CRE questions:

Q.  What are the major factors you see influencing CRE in the Inland Empire in 2016?

A. From an industrial perspective, the e-commerce movement along with the improving economy and employment growth are among the major factors influencing the market.

• As a result of the e-commerce movement, more than 14 million square feet that are currently under construction have clear heights of 36 feet and greater, driven mainly by demands from e-commerce companies.
• The Inland Empire has experienced a boom in e-commerce related activity, driven by the availability of land to build large, mega facilities, direct access to the ports, and an extensive highway network that services not only Southern California, but also other major markets upstate.
• The IE economy  continues to experience steady incremental growth, as the unemployment rate dropped 70 basis points since the beginning of the year to 6.1%.
• Interest rate hikes are not expected to have an immediate impact on CRE.

Q. Keeping Pace: How will global logistics strategies impact the Inland Empire?

A. The Inland Empire, as well as the Southern California region, benefit from the ports’ location, as well as from the improvements the ports have made. As long as West Coast ports hold the majority of the market share, the Inland Empire industrial market will benefit due to its reasonable rents; its established highway network and rail line to help move goods.

However, recent events, both at home and abroad, have shined a spotlight on the risks involved in heavily relying upon the West Coast, specifically Los Angeles-Long Beach, as the main transit system. These circumstances forced companies to consider alternate supply chains in order to mitigate this risk moving forward.

Q. How do today’s industrial facilities compare to previous ones?

A. The Inland Empire has always had technologically sound industrial facilities. One noticeable modification is the change in a “standard” clear height. E-commerce companies need a higher clear height in order to house hundreds of thousands of products they offer to shoppers.
Ten years ago, the industrial landscape was dominated by smaller buildings of less than 200,000 sq. ft. Today, an increasing number of mega facilities are being constructed, to accommodate the e-commerce players coming into the market.

E-commerce is the chief driving force behind the changes in warehouse design, size, technology and construction. This new crop of buildings also requires more truck spaces and additional parking, due to an increase in employee numbers.

• 113 buildings had clear heights of 32 feet or higher (2000-2010)
• More than 94 buildings constructed with clear heights of more than 32 feet (since 2011)
• 33 buildings with clear heights of 36 feet and above (current), majority (25) built or underway since 2014
• The newest facility of a premier retailer has a clear height of 40 feet.

Connect With CBRE’s Cesta

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