Lisa Mailhot | May 14, 2024
Buyers
The Inland Empire, once a thriving hub for big-box and e-commerce logistics, faces an oversupply bubble impacting the warehouse market. According to Sun Life Financial Inc., the region's outsized development completions and extensive growth during the pandemic have led to an oversupply situation, putting downward pressure on achievable rents and cap rates.
This valuation pressure has been particularly evident in Sun Life's US real estate holdings, with their Inland Empire properties significantly contributing to the 4.6% quarterly and 15% year-over-year value decline. Randy Brown, Sun Life's chief investment officer and head of insurance asset management, acknowledged the area's cap rate and yield decompression, leading to a drop in achievable rents.
The oversupply situation in the Inland Empire is not unique to Sun Life. Prologis Inc., a major warehouse owner in the US, also lowered its 2024 earnings guidance due to lower average occupancies, with the leasing slowdown being most acute in Southern California and the Inland Empire.
Even with the difficulties, Randy Brown emphasized that Sun Life's properties in the Inland Empire are still fully occupied, with solid tenants and long-term leases. However, the office sector continues to experience negative valuation changes as the market seeks a floor, although the pace of these drops is slowing down.
Sun Life remains committed to its long-term real estate holdings, as most of its properties are mortgage-free, and the company has no intention of being a forced seller. While valuation changes can impact reported earnings, the impact may not necessarily be realized, and in many cases, it may never be.
Bottom Line
If you're considering a move to Orange County, let's connect. As a real estate professional, I can provide valuable insights into navigating the dynamic market conditions and help you make informed decisions.
Reference: "Oversupply bubble’ for Inland Empire warehouses?” by Bloomberg. Published on May 13, 2024.
Learn why a home equity line of credit (HELOC) may be smarter than a home equity loan this November. With expected rate cuts, a HELOC offers flexibility, savings on re… Read more
Nearly 23% of first-time homebuyers are holding off on their home search until after the upcoming election, hoping the winner’s housing policies will work in their fav… Read more
Climate disasters expose severe risks for mobile home residents, with hurricanes Helene and Milton highlighting how vulnerable these homes are. Explore why mobile home… Read more
The American Real Estate Association is exploring a class action against the National Association of Realtors (NAR) over its Clear Cooperation Policy. Learn how this p… Read more
Student loan borrowers, be prepared for significant changes in 2025 as credit reporting and collection activities resume. Learn what steps to take now to protect your … Read more
An investigation uncovers rampant discrimination against Section 8 tenants in California, with many landlords denying rental contracts to voucher holders. Learn more a… Read more
A lien on your property can halt a sale and create financial complications. Learn what a lien is, how to resolve it, and what options you have if it's incorrect. Under… Read more
With 223,000 affordable housing units set to expire in the next five years, low-income families may soon face drastic rent hikes. Explore the challenges of preserving … Read more
As mortgage rates stabilize, homebuyers are showing renewed interest with a 9% increase in purchase loan applications year-over-year. Explore what this means for the h… Read more
Let's find a time that suits you best to chat about your goals, show you how we work, and figure out how we can help you the most