ahead since summer, following the first couple months of uncertainty when industry players took a step back to review and assess the market thought process.” One needs to only look as far as the Inland Empire — the most robust in -dustrial market in the country — to see how this product type has fared in 2020. This region is on track to com -plete (as of press time) more than 100 transactions on buildings with more than 100,000 square feet in 2020. This would surpass the 92 transactions it recorded in 2019, which was a record year. “In 2021, we ex -pect this trajectory will continue to accelerate,” John continues. “A lack of inventory will be our only obstacle to sustaining this growth down the line.” John The Inland Em -pire saw 8.2 million square feet of new industrial space de -livered in the third quarter of 2020, ac -cording to JLL’s latest market report. The problem was that 39.1 percent of that product was already pre-leased. The region’s active development pipe -line is just 15.5 million square feet, the lowest it’s been since 2015. “In the Inland Empire, we are an -ticipating a continu -ation of the velocity we are seeing from tenants in the in-dustrial and distri-bution sector for at least the first portion of 2021, and realisti -cally the foreseeable Hewett future, until there is a timeline for normal life to resume,” says Mac Hewett, managing director at JLL in Ontario. “The biggest con -cern we have is running out of avail -able buildings. At the same time that COVID-19 caused a massive spike in tenant demand, it disrupted the de -velopment cycle and put everything on pause for several months over the second and third quarters of this year. We will likely see this shortage hit in mid-2021, and will have a short -age until the developments can catch up. This is causing a massive spike in pricing as the imbalance between sup -ply and demand continues to widen.” True to form, industrial rents in the Inland Empire climbed 1.6 percent be -tween the second and third quarters of 2020 as vacancy sat at 4.7 percent, per JLL’s report. Fortunately, firms like Real Estate Development Associates (REDA) are working to address this shortage. The Newport Beach-based diversified in -vestment company plans to break ground on more than 4 million square feet of industrial real estate in the In-REDA plans to break ground on more than 4 million square feet of industrial real estate in the Inland Empire in 2021, alleviating some of the pent-up demand. One of those projects will be for ecommerce company Uline, which has experienced rapid growth since the pandemic. land Empire in 2021. One of those proj -ects will be for Uline, a private suppli -er of shipping and business supplies. The company has experienced rapid growth since the pandemic as con -sumers turned to ecommerce to fulfill their shopping needs. “One thing the pandemic has done is reinforced how easy it is to get ev -eryday necessities online and shipped directly to your home,” says Jason Krotts, a principal at REDA. “I think 2021 Krotts will be an exception -al year for industrial real estate.” A Biden administration may make it an even better year, some experts as -sert. “Under Joe Biden, the industrial sector is likely to continue to thrive,” John contends. “It could be positively impacted due in part to the fact that Biden has proposed that he will mend relations with China. In the Inland Empire, we saw an influx of foreign distribution groups start to come back in a significant way just prior to No -vember, including Chinese importers, so this will likely continue to increase as restrictions are eased. This will lead to more and more competition in the industrial sector and push up rents, which is ultimately great for Inland Empire business.” It may also be great news for busi -ness at the ports. “Southern California industrial de-mand is primarily driven by imports into the ports of L.A. and Long Beach,” Hewett adds. “Imports are driven by U.S. trade with Asia. The immediate reaction to a Joe Biden presidency, as it relates to foreign relations, seems to be positive as most commentators are predicting a less turbulent relation -ship. At the surface, this appears to be positive for Southern California as trade becomes more stable in the Pa-cific region.” Retail Waits To Reopen, Recover Right now, retail is a tale of two markets: the essential and the non-essential. Or the “haves” and “have nots.” This is particularly true in Cali -fornia where current stay-at-home orders limit retail capacity to 25 per -cent, while dining — whether indoors or outdoors — is not allowed in most regions. This has forced many retailers and restaurants to embrace ecommerce, omnichannel and third-party delivery apps. “COVID-19 has been an accelerant of the trends — good and bad — that were already underway,” explains Mark Si -gal, CEO of Datex Property Solutions in Woodland Hills, Calif. “As that per -Mark Sigal tains to retail, this is a segment that is in a permanent state of disruption and reinvention. On the positive front, necessity is the mother of invention, especially in retail — a technology-laggard industry — and more retail -ers are innovating and experimenting because they must. One clear area of accelerant is supporting omnichannel for ordering, pickup and/or delivery.” The Nielsen Global New Shopper Normal Study notes 66 percent of the general population now takes an omnichannel approach to shopping, while 72 percent of “constrained” (those with income challenges since the pandemic) shoppers embrace this approach. The October 2020 study fur -ther noted that only 9 percent of global consumers were regularly shopping online before the pandemic hit. This leaves retailers who haven’t embraced the ecommerce and om-nichannel models in a precarious spot, especially as restrictions linger. “The retailers that over the years have been slow to adjust to omnichan -nel retailing have not survived,” says Vicky Hammond, a principal at Core -land Companies in Tustin, Calif. “Both national and local alike, these stores were behind from the start — caught by surprise and unable catch up in the midst of rolling lockdowns. Sadly, this included a number of small business-es without market share or extra cash flow to have made so many significant changes in such little time.” continued next page www.REBusinessOnline.com Western Real Estate Business • December 2020 • 37
Western Real Estate Business December 2020: Page 37
