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What is California’s Inland Empire and why do we like it so much?
The Super Bowl may be heading to Los Angeles this year, but many of LA’s residents are heading elsewhere: the Inland Empire, California’s third-largest metropolitan area. You may not be too familiar with this region just yet, especially compared to how much noise LA and San Francisco make–but after tying with Phoenix in 2020 for the biggest gain1 in household migration in the U.S., expect to start hearing a lot more about it soon.
Centered around the cities of Riverside and San Bernardino, the Inland Empire is just east of Los Angeles County. Over the last thirty years, this area has grown by 78%1, more than twice as fast as the rest of California during that same time period. In 2021, Southern California’s economy became the 13th largest in the world2, with The Inland Empire leading the region’s economic growth.
The Inland Empire ranked #18 overall on our 2022 Best Places to Invest Report, as well as #15 for multifamily and #4 for industrial.
We see an opportunity for investing in real estate in the Inland Empire and here’s why.
1. Multifamily vacancies are decreasing as rental rates continue to increase in the Inland Empire amid rapid population and job growth.
The Inland Empire leads Southern California in population and job growth, thanks to a lower cost of living compared to nearby coastal California markets* and rising demand for warehouse workers amid the e-commerce boom2. The development of new multifamily properties in this market has been increasingly difficult, thanks to heightened construction costs and longer entitlement (i.e. government approval) processes*. Heightened demand from a growing population has contributed to a decrease in vacancies and increased rental rates for multifamily properties–18.5% between Fall 2020 and Fall 2021.
*Green Street - Inland Empire Apartment Market Snapshot - 1/26/2022
2. One of the most prominent distribution hubs in the Western U.S., The Inland Empire’s economy is booming1 with e-commerce warehouses.
We see significant opportunities for investors in industrial properties in 2022, as increasing consumer reliance on e-commerce (i.e. online shopping) continues to drive demand for this asset class. Ranked #4 for industrial on our 2022 Best Places to Invest Report, the Inland Empire is the nation’s tightest market (i.e has the least availability) for this asset class, with record leasing volume bringing vacancy rates to a mere .06% in Q4 ‘21**. For comparison, the vacancy rate over the last several years was around 4.2%**. Low supply amid heightened demand has lead to significant price increases, with staggering year-over-year rent growth of 59.6%** for industrial properties.
** JLL - Inland Empire Industrial Insight - Q4 2021
What this means for investors:
Both the industrial and multifamily sectors in the Inland Empire are facing lower vacancy rates amid increased demand. As is traditionally the case when supply and demand are at odds, it’s reasonable to assume that rent growth will continue its upward trend in this market. As rent increases due to demand, investors in these types of deals stand to earn greater distributions (i.e. regular cash payments as determined by the business plan) as the property brings in more income.
Read The Full 2022 Best Places to Invest Report Here
This article was written by an employee of CrowdStreet, Inc. (“CrowdStreet”) and has been prepared solely for informational purposes. CrowdStreet is not a registered broker-dealer or investment adviser. Nothing herein should be construed as an offer, recommendation, or solicitation to buy or sell any security or investment product issued by CrowdStreet or otherwise. This article is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate.
Works Cited
Mai-Duc, Christine, and Paul Overberg. “Californians Flee the Coast to Inland Cities in a Mass Pandemic-Era Exodus.” The Wall Street Journal, Dow Jones & Company, 21 Nov. 2021, https://www.wsj.com/articles/californians-flee-the-coast-to-inland-cities-in-a-mass-pandemic-era-exodus-11637521731.
Smith, Kevin. “Inland Empire Leads Southern California in Economic Growth, Report Says.” Orange County Register, 8 Dec. 2021, https://www.ocregister.com/2021/12/08/report-inland-empire-leads-southern-california-in-economic-growth/.
