Brokers: Inland office market improving, but far from all the way back


Despite steady improvement in the Inland Empire office market, no office buildings will be developed in the region for some time, according to two of the market’s leading office brokers.

Tom Pierik and David Mudge, both senior vice presidents with Lee & Associates Riverside, said office buildings won’t be developed in Riverside or San Bernardino counties for at least 18 months, and maybe not for three years.

“The market is more active than it’s been in the past few years, and it’s definitely improving from the landlord’s standpoint,” said Pierik, who along with Mudge addressed a luncheon gathering  Wednesday of the Orange County/Inland Empire chapter of Commercial Real Estate Women. “We’re getting tenants that are more active and who are looking for more space. But that doesn’t mean that offices are going to get built here anytime soon.” 

The CREW luncheon’s location was symbolic of the Inland region’s struggling office market: an unfinished room at Citrus Tower, the Class-A office building that opened last April in downtown Riverside and so far has attracted only one tenant, the national law firm Best, Best & Krieger LLP.

Despite the absence of any office construction in the near future, both Pierik and Mudge painted an optimistic portrait of the office market in Riverside and San Bernardino counties.

Much of the office space that has sat vacant since the recession hit more than four years ago is slowly starting to fill up, both said.

“I’d say we’re cautiously optimistic,” Mudge said. “There are some active submarkets, like Corona, and some submarkets that are lagging, like San Bernardino, but overall we’re seeing positive things in the market.”

More than 400,000 square feet of office space was absorbed in the Inland Empire last year, more than double the space that was absorbed within the region in 2010 and 2011 combined, Pierik said.

Also, lease rates have flattened, vacancy is down and more tenants are starting to come into the Inland region from outside  the market.

"There are still a lot of great deals out there,” Pierik said. “We’re moving away from being a tenant’s market.”

Pierik and Mudge are brokering Citrus Tower, a six-story building at the southeast corner of Lime Street and University Avenue. Lease rates for the first five floors average  $3.10 a square foot, roughly $1 a square foot more, on average, for Class A office space in the Inland Empire.

Space on the sixth floor, which offers a 360-degree view that includes The Mission Inn and downtown Riverside, goes for $3.45 a square foot. Best, Best & Krieger has leased the entire fifth floor and about half of the fourth floor; about 35,000 square feet total, but so far the rest of the building remains empty.

Both brokers said they’re close to signing deals with two tenants, each of which would occupy between 6,000 and 8,000 square feet, and that their goal is to have Citrus Tower at least 50 percent occupied by the end of the year.

The fact that tenants aren’t flocking to what is arguably one of the best office locations in the Inland Empire doesn’t mean the local office market isn’t recovering, Pierik said.

“It’s like selling cars,” Pierik said. “You might sell 50 Fords in one month, but only one Rolls Royce. This building is a Rolls Royce.”

This article has been written courtesy of IE Real Estate Insider

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