- The UCR School of Business Center for Economic Forecasting and Development released the new Inland Empire Business Activity Index on 15th December.
- The Inland Empire Business Activity Index mainly accounts for seasonal changes and measures the performance of the regional economy of the Inland Empire every quarter.
- The new index shows that business activity in the area grew at a 2.8% annualized rate during the third quarter of 2022. It is further anticipated to grow between 2% and 3% over the following 12 months.
Business Activity In Inland Empire in 2022
Despite the current macroeconomic volatility, business activity in the Inland Empire has continued to increase and is expected to do so in the foreseeable future.
The current rise in business activity in the area indicates a considerable drop in growth from the previous quarters (4.7% in the first quarter and 6.4% in the fourth quarter of 2021) but a significant improvement over development in the 2nd quarter (1.6%). According to the analysis’s authors, the longer-term fall in the IE’s growth rate is anticipated since the region’s economy has firmly returned to pre-pandemic circumstances.
“Since the pandemic’s lows, the Inland Empire has experienced a very steady economic recovery, outpacing coastal California along many key measures,” said Taner Osman, research manager at the Center for Economic Forecasting and one of the Index authors. “While we are now seeing some weakness in the residential real estate market, that has been largely offset by impressive growth in employment, the labor force, consumer spending, building permits, and commercial real estate.”
An Uptick in Commercial Construction
Local commercial real estate construction is undoubtedly booming, with the value of almost all non-residential building permit categories expected to increase by 2022. Surprisingly, office property is the sector seeing the most growth, considering the pandemic-driven move toward remote work.
The Inland Empire had an increase in building permits for new office space of around 380%, raising the year-to-date value of the latest commercial real estate in the area by 205.7% above 2021 levels. A 46% yearly increase in non-residential modifications and expansions demonstrates how many existing businesses have chosen to upgrade or extend their premises.
Some areas of the local commercial real estate market are doing better than others in terms of vacancies. Office buildings continue to astound, with vacancies rising only 0.2 percentage points during the first quarter of 2020.
Impact of Rising eCommerce
On the other side, retail real estate has shown signs of being negatively impacted by the increase in e-commerce expenditure and has had the most significant increase in vacancies (0.6 percentage points).
Given the growth of e-commerce, it is not unexpected that warehouse and distribution properties have had their vacancy rates drop by a staggering 9.1 percentage points since the first quarter of 2020, despite roughly 35 million square feet of new space available during that time.
The UCR School of Business Center for Economic Forecasting and Development published the new Inland Empire Business Activity Index. According to the indicator, local business activity increased by 2.8% annually during the third quarter of 2022. The report’s authors predict that during the next 12 months, the region’s GDP will expand by 2% to 3%.
Building permits for new offices increased by almost 380% in the Inland Empire, increasing the value of the latest commercial real estate in the region by 205.7% this year. With vacancies growing barely 0.2 percentage points in the first quarter of 2020, office buildings continue to astonish. The highest increase in vacancies has been in retail real estate, which has shown symptoms of being badly affected by the rise in e-commerce spending.