Andrew Edwards, Staff Writer
Created: 05/08/2012 02:23:12 PM PDT

Recent signs suggest the Inland Empire’s office market may be returning to health, but the market may be at least three years from a full recovery.

That’s the word from Lee Spence, a principle at DAUM Commercial Services branch in Ontario, who based his prediction on his firm’s analysis of companies gradually moving in to the many vacant offices of San Bernardino and Riverside counties.

An analyst for another brokerage said Spence’s timeline may be too optimistic, but while data available from multiple commercial brokerages differ on specifics, the numbers show some slight improvements for the Inland Empire’s ailing office markets.

Spence’s analysis rests on DAUM’s observation that office users signing new leases during the first three months of 2012 reduced the region’s office vacancy rate from 19.2 percent to 18.7 percent and absorbed some 210,000 square feet of office space.

If absorption continues at that pace, office vacancies could decline to something closer to 10 percent before the end of 2015, Spence said.

A 10 percent vacancy rate would allow landlords to deal with tenants on a more equal footing than they can today, he said. That would push office rents up and give owners more financial stability.

“That’s the kind of thing that stops that downward spiral. If we keep this pace up, we can be out of the woods in three and a half years,” Spence said.

Recent market conditions have not supported higher rates. Numbers from DAUM as well as Voit Real Estate Services and Colliers International show that although vacancy rates dropped during the first quarter, office rents also fell a bit.

DAUM’s numbers show Inland Empire office rates falling one cent to $1.68, quarter-to-quarter. Rates stood at $1.75 per square foot one year prior.

Spence’s prediction rests on the assumption that there will be no sudden improvements or shocks to the local economy nor any new office construction in San Bernardino and Riverside counties.

Inland Empire office construction has been at a near halt since the post-2007 downturn.

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