Inland Empire industrial construction starts have slowed following surge in new developments between 2020-2022

During the pandemic, the warehouse market saw intense competition due to heightened consumer spending and a shift toward just-in-case inventory models. This surge led to a significant demand for additional storage, prompting developers to capitalize on rising lease rates.

From Q4 2020 to Q3 2022, an average of 7.8 msf of new warehouse construction commenced each quarter. However, market dynamics have shifted since then. Demand has notably softened, resulting in declining lease rates and an oversupply relative to demand. Consequently, developers have become more cautious in their financial projections. Currently, 4.0 msf of new warehouse projects are breaking ground per quarter based on the timeframe of the post-pandemic high to current quarter.

Construction starts are anticipated to remain subdued due to the prolonged leasing timelines for the abundant new supply in the market, a contrast from the pandemic when projects were quickly preleased or leased shortly after completion. This slowdown may prove beneficial for the Inland Empire industrial market, allowing time for recovery and gradual demand resurgence, helping stabilize availabilities until market conditions strengthen.