News

The real estate market in the High Desert continues to expand in the fourth quarter of 2016, posting steady gains in all real estate sectors. A strong economic market coupled with the lowest unemployment rate since 2007 also contributed to the expansion we are experiencing in the real estate market.

Housing, a key component to a healthy real estate market, has posted year-over-year gains of 14%, with the median sales price of a home at $223,000 ending October 2016. The average price per square foot in October was $121 per square foot. Inventory remains tight with only a three-month supply of inventory, half of what the National Association of Realtors determines as a balanced market.

Commercial real estate continues to expand in all sectors with increased activity in the Industrial sector along with a noticeable increase in land sales. Multi-family remains the darling of investors with the Retail and Office sector following in performance. The following is a brief overview of all commercial real estate sectors.

Retail

The retail sector continues to expand with new deliveries, primarily surrounding the three new Super Walmart centers in Hesperia and Victorville. Vacancy rates have declined from 11.1% in January of 2016, to 9.8% in October of 2016. Net absorption of retail space in 2016 has been 64,080 square feet (SF), with 133,770 SF of positive absorption in the third quarter of 2016 alone. The retail sector will continue to experience positive gains in absorption and rental rates into 2017.

Industrial

The Industrial sector has experienced significant gains, primarily fueled by Adelanto’s Cannibals Cultivation zones. With industrial buildings in the cultivation areas increasing in value as much as 750% with 24 months, demand has driven non-cultivation tenants to surrounding cities seeking more economical solutions. As a result of the high demand in the Industrial sector, vacancy rates have declined, ending the second quarter of 2016 at 3.5%, while the rental “ask” rate has increased from $0.41 PSF monthly ending 2015, to $0.80 PSF in October of 2016. Demand will continue in the Industrial sector with new deliveries on the horizon.

Office

The office sector has remained stable through the economic downturn and subsequent recovery. Vacancy rates have steadily declined since the fourth quarter of 2009 when vacancy rates peaked at 7.8%, ending the third quarter of 2016 at 5.2%. Rental “ask” rates continue to increase year-over-year, ending the third quarter of 2016 at $1.36 PSF monthly. While new deliveries are primarily limited to owner-use, the decline in vacancy rates coupled with increased rental rates will lead to new construction in 2017 to meet demand.

Multi-Family

Demand for Multi-family properties continues with foreign capital adding additional pressure to an already tight market. Capitalization (CAP) Rates have fallen to a ten-year low, with properties now trading in the low 5% CAP Rate range. Vacancy rates are at their lowest levels since 2001, recording twelve consecutive quarters of positive rent growth. Over 161,000 units were completed in 2015, marking the largest delivery of new units since 2001. With the steady increase of rents, new deliveries in the High Desert will continue to increase in 2017.

Land

Land transactions have increased significantly year-over-year, increasing 45.3% over the same period in 2015, with the total dollar volume in sales up 35.4% over 2015. Land values in Adelanto’s cultivation zones have experienced the largest increase in the region, with parcels trading as high as $1,500,000 per acre. Land sales will continue to increase as new housing starts increase, and demand continues to drive both the Industrial and Retail sectors.