Economy Property

Snapshot of the Commercial and Industrial Real Estate Markets in the High Desert

By Ronald J. Barbieri, Ph.D., CPA

Office Market

As of the end of 2011, the High Desert had almost 5.5 million SF of office space. The net absorption for 2011 was negative 8,900 SF compared to the 135,000 SF absorbed in 2010. The vacancy level at the end of last year was 347,000 SF or 6.4% of the total inventory. The increase in the vacancy rate was mostly due to the delivery of 62,000 SF of office space in the second half of last year. Most of the increase in office space demand over the last two years was from the expansion by local government and the medical profession. There was 25,000 SF of office in Apple Valley under construction as of the end of 2011. The new construction is targeted for medical users. While the office space is only slightly oversupplied, there has not been any additional demand for space in the High Desert. This has resulted in a slight decline in rental rates over the last year.

Retail Market

There was 15.6 million SF of retail space in the High Desert of which 1,352,000 SF was vacant at the end of 2011. This represents a vacancy rate of 8.7%. The High Desert experienced a negative net absorption of 67,000 SF in 2011, compared to a positive 262,000 SF in 2010. Only 6,900 SF was delivered in the second half of that year. Macy’s has announced that they would be moving into a vacant 70,000 SF former department store in the Victor Valley Mall and adding an additional 30,000 SF to the structure. However, this will not be reflected in the absorption figures until early 2013. Three super Wal-Marts in Victorville, Hesperia and Apple Valley are under construction and are expected to be completed this year.

Industrial Market

There was 20.4 million SF of industrial space in the High Desert at the end of 2011. The vacancy rate was 6.1% or 1,241,000 SF. The net absorption in 2011 was 978,000 SF, which was approximately the same the prior year. There is 49,600 SF under construction. Most of the absorption was in the large boxes. Substantial warehousing and distribution as well as manufacturing companies counted for the increase in demand. The cities of Adelanto and Barstow accounted for the negative absorption in 2011. The City of Victorville absorbed over 1,000,000 in both 2010 and 2011. Most of this increased demand occurred at SCLA.

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