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Industrial Real Estate
COLTON
SECTION 6
INDUSTRIAL REAL ESTATE
Colton has a significant amount of industrial land, including the Agua Mansa Enterprise Zone to the
south of the city where firms can locate and gain significant labor and equipment cost advantages
under California law. However, its ability to capitalize on this situation has been drastically limited
by the habit required for the elusive Delhi Sands Flower Loving Fly. This is a particular problem
for Colton for two reasons. First, the city is now directly in the path of the outward migration of
industrial firms entering the Inland Empire. This is the case since the area west of the I-15 freeway
is running out of undeveloped space (Exhibit 78). As a result from 2000-2003, 26 major facilities of
over 250,000 square feet were built east of the I-15 from Fontana to Redlands, including Colton
(Exhibits 79-80). The city is thus in the period when it could be competing for these operations.
Second, Colton has a need to see blue collar employers of this kind move near to it due to the large
number the city’s residents who require this form of work. Fortunately, Colton is part of regional
councils such as the Inland Valley Development Agency, San Bernardino International Airport
Authority and San Bernardino Associated Governments. Through these agencies it can help to
encourage the types of expansion that are needed by many of its workers.
For Colton, it is particularly important that these industrial firms are continuing to be lured or forced
to migrate into the Inland Empire to take advantage of its lower land and labor costs. As recently as
the 4-quarters ended at 3rd quarter 2001, gross absorption in the region set at a record at 48.0 million
square feet. Even during the recent period of economic difficulty, the inland region saw 28.5
million gross square feet absorbed in 2003 (Exhibit 77). This continued rapid absorption is
occurring at a time when the Westend has only about 2,000 acres of usable land available for
industrial development. Yet, in the past 12 years, that area saw 5,758 acres used up. If the next 12
years are anything like that period, it is inevitable that a large number of blue collar companies will
end up in the Colton area. In fact, the future will likely be stronger than the 1991-2003 period since
it included the deep defense downturn that hit Southern California at the end of the Cold War.
Costs Lure Firms Inland. The Inland Empire’s strong industrial development pressures are not
going to evaporate. In 1991, the region’s industrial space vacancy rate was 24%. Once the
recession started ending in 1993, a large number of firms moved to the inland region to take
advantage of its newer space and lower costs. As a result, the Inland Empire’s vacancy rate plunged
to 8% in 1995. Despite building millions of square feet of space since that time, the rate was down
to 6.9% in 4th quarter 2003 (Exhibit 82). Firms are making this move, in part, because the inland
area’s workers are willing to take local jobs for 2% to 5% less pay than those living in the coastal
counties to avoid the time and harassment of long commutes. Companies are also coming to the
area because it offers modern space for lower lease costs. For instance in December 2003, 250,000
square feet in Colton could be leased for $1,145,000 a year ($0.38 sq.ft./mo.). In the coastal
counties, the San Gabriel Valley offered the least expensive lease space in Los Angeles County
with 250,000 square feet going for $1,290,000 ($0.43 sq. ft./mo.). That was a $145,000 or 12.7%
premium over Colton (Exhibit 87). The same space would cost $1,620,000 in northern Orange
County, that area’s cheapest market ($0.54 sq. ft./mo.) which is a $475,000 or 41.5% premium.
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Section 6 Colton Page 47
Industrial Real Estate
Within the Inland Empire, Colton’s space ($0.38 sq. ft./mo.) leases for just above the regional
average rate of $0.36 per square foot per month or $1,092,500 a year for a 250,000 square foot
facility. However, the city’s space was less expensive than such large markets as Riverside
($1,260,000), Corona ($1,215,000), Rancho Cucamonga ($1,190,000).
Inventory of Space. In fourth quarter 2003, there was 290.7 million square feet of industrial space
in the Inland Empire. That was roughly one-third of the space in giant Los Angeles County. Of this
inventory, 5.9 million or 2.0% was located in Colton and Rialto (Exhibit 81). The complete East
Valley represented 48.1 million square feet of the total (16.6%). The dominate share was in the
inland region’s western section with 194.7 million square feet (66.9%) due to their proximity to the
coastal counties. Riverside and Moreno Valley-Perris areas had 24.2 million square feet (8.3%).
As indicated, just 6.9% of the industrial space in the Inland Empire was available for occupancy
(Exhibit 82). That represented 19.4 million square feet either vacant or occupied but soon ready for
the market. In addition, 8.6 million square feet is under construction representing 50.2% of the new
facilities being built in Southern California. Very little of this available space is in the Colton-
Rialto segment of the market with just 34,866 square feet available or 0.2% of the total (Exhibit 83).
Only the Moreno Valley-Perris market has less space (11,500 square feet). The Colton-Rialto area’s
vacancy rate of 0.6% is also the second lowest ahead of the 0.2% in Moreno Valley-Perris (Exhibit
84).
Inland Empire Firms. From 1994-2003, the Inland Empire’s competitive advantages have caused
1,110 major companies to come to the Inland Empire or taken additional space in the area in order
to expand. Of these, 583 have been manufacturing companies (52.5%), 395 have been distributors
(35.5%) and 121 have been large service operations or agencies (12.0%) (Exhibit 85). The source of
the firms expanding in the area included 256 migrating from coastal counties (23.1%), 411 either
entered Southern California for the first time or put their newest facility in the inland area (37.0%).
The other 443 moved within the inland region to expand (39.9%). The area’s expanding
manufacturers have averaged 68.5 workers and used 1,040 square feet of space per worker. Its
distributors have averaged 104.5 and used 2,072 square feet per worker.
Prior to 2000, very few of these firms were coming to either the East Valley or Colton. However, as
indicated, in the 2000-2003 period, 26 firms have expanded in the area east of the I-15 freeway.
These companies have largely been distributors and have involved 20.8 million square feet meaning
they have averaged 800,000 square feet. These firms have announced that they will create 9,244
new jobs. That represents an average of 2,250 square feet per job, somewhat more than the 2,072
for distribution firms in general and a little more than double the 1,040 square feet per job in
manufacturing (Exhibit 86).
Summary. Given the education, age and skill profile of Colton, the migration of blue collar firms
to the city and the surrounding East Valley is essential to the long term prosperity of the community
and its residents. It is thus fortunate that the natural flow of the economy is now bringing an
increasing number of firms east of the I-15 freeway. Colton’s problem with the Delhi Sandfly
means it will not be able to capture the share of these companies that its available land and the Agua
Mansa Enterprise Zone should allow. That said, its position on regional boards will allow it to
encourage these trends.
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Section 6 Colton Page 48
Industrial Real Estate
Exhibit 77.-Industrial Space Gross Absorption
Inland Empire, 199 1-2003 (mov ing 4-quarter total)
5 0 ,0 0 0 ,0 0 0
4 5 ,0 0 0 ,0 0 0
4 0 ,0 0 0 ,0 0 0
3 5 ,0 0 0 ,0 0 0
3 0 ,0 0 0 ,0 0 0
2 5 ,0 0 0 ,0 0 0
2 0 ,0 0 0 ,0 0 0
15, 0 0 0 , 0 0 0
10 , 0 0 0 ,0 0 0
5 ,0 0 0 ,0 0 0
0
19 9 1 19 9 2 19 9 3 19 9 4 19 9 5 19 9 6 19 9 7 19 9 8 19 9 9 2000 2001 2002 2003 2004
Sourc e: Grubb & E l lis & E c onomic s & Poli tic s, Inc.
Total Industrial Space Available . . .
The Inland Empire industrial real estate market surrounding Colton is among the strongest in the United States.
Industrial space absorption by manufacturers and distributors soared from 1998 to 2001 before trailing off in
2002-2003 due to national and state difficulties in manufacturing and distribution (Exhibit 77). For the 4-
quarters ended at 3rd quarter 2001, gross absorption reached a record 48.0 million square feet. More recently, in
the 4-quarters ended in 4th quarter 2003, some 28.5 million square feet was absorbed. (Note: each point shows
the amount of space taken in the 4-quarters ended at that point to smooth out quarterly fluctuations.)
Today, it is clear that the western area of the Inland Empire’s industrial market is running short of land (Exhibit
78). The total space remaining in this area is 3,587 acres (Exhibit 78). However, of this, a good deal represents
smaller lots that cannot be assembled into sites large enough for modern industrial facilities. Also, the 1,000
acres in Chino has no infrastructure and the space in Mira Loma is subject to environmental difficulties. That
leaves only about 2,000 acres available for development. This contrasts with the 5,758 acres that were used
from 1991-2003. If demand reaches that level in the future, it is clear that development must migrate deeper
inland. Demand is likely to be at least as high as the 1991-2003 period since it included the severe 1991-1994
post-Cold War defense downturn.
Exhibit 78. -Re maining I ndustrial Acres vs. Inland Empire Absorption
I nland Empire 199 1-2003 Absorption; W est I-15 R emainde r 20 03
Upland-Montclair 50
Corona 207
Chino 350
Ontario 300
Rancho Cucamonga 600
Chino-Dairy 1,000
Mira Loma 1,080
Total Remaining Dif f icult to Use 3,587
Occupied 1991-2003 5,758
ing
Source: Economics & Politics Inc. work with Grubb & Ellis data
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Section 6 Colton Page 49
Industrial Real Estate
Exhibit 79.-Directon of Industrial Activity
Industrial Market Approaching Colton . . .
With land disappearing west of the I-15 freeway, industrial development is migrating deeper inland along major
transportation corridors (Exhibit 79). The central thrust of this migration has been along the I-10 corridor from
Fontana towards Colton and San Bernardino International Airport. A second thrust has been along the SR-60
and SR-91 freeways toward the Moreno Valley, Perris, eastern Riverside area near March Air Reserve Base. A
third thrust has been north on the I-15 freeway into the High Desert.
To date, there have been 26 developments of 250,000-1,000,000 square feet built and occupied in the East
Valley. Another seven have been developed and occupied in the area near March ARB. Six have ended up in
the High Desert (Exhibit 80). This is good news for Colton residents as it is putting a growing blue collar job
base nearer to their homes.
Exhibit 80. -New Inla nd Empire Firms of Over 250, 00 0 Square Feet, 2000 -2 003
Ea st S an Be rnardino Valle y-East Riverside-Moreno V alley-P erris & Victor V alley
26
7
6
East Valley M oreno Valley-Riverside-Perris Victor Valley-Barstow
Source: CB Richard Ellis, Grubb & Ellis, Cushman Wakefield, Lee & Associates, IEEP.
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Section 6 Colton Page 50
Industrial Real Estate
Exhibit 81. -Total Industrial Spa ce, By Market
Colton & I nland Empire Market Area, 4th Quarter 2 003
Ontario/Mira Loma 107,950,510
Chino 29,968,499
Rancho Cucamonga 27,995,207
Fontana 27,053,263
Corona 22,364,539
Riverside 19,081,164
Redlands/San Bdno 15,211,636
High Desert 11,969,244
Temecula 11,863,670
Montclair/Upland 6,391,809
Colton/Rialto 5,869,135
Source: Grubb & Ellis
Moreno Vly/Perris 5,078,264
Industrial Space. . .
In fourth quarter 2003, there was 290.7 million square feet of industrial space in the Inland Empire. Of this, 5.9
million or 2.0% were located in Colton and Rialto (Exhibit 81). The East Valley represented 48.1 million
square feet of this space (16.6%). The western markets of the inland region had the dominate share with 194.7
million square feet (66.9%) due to their proximity to the coastal counties. The combined Riverside and Moreno
Valley-Perris areas had 24.2 million square feet (8.3%). There was 12 million square feet in both the High
Desert and Temecula area (4.1% each).
In fourth quarter 2003, only 6.9% of the industrial space in the Inland Empire was available for occupancy
(Exhibit 82). Despite the millions of square feet built in recent years, the rate has been below 9% since 1998
with the basic thrust being slowly downward. Currently, 8.6 million square feet of industrial space is under
construction representing 50.2% of the new facilities being built in Southern California. New development in
Los Angeles County is just 45.3% of the Southland’s new space and Orange County represents just 4.5%.
Exhibit 82. -Industrial Spa ce Av ailability Ra te
Inland Empire, 19 90-200 3
26%
24%
22%
20%
18 %
16 %
14 %
12 %
10 %
8%
6%
4%
2%
0%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: Grubb & Ellis
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Section 6 Colton Page 51
Industrial Real Estate
Exhibit 83.-Industrial Space Vacant or Coming Available, By Market
Colton & Inland Empire Market Area, 4th Quarter 2003
Ontario/Mira Loma 7,054,253
Chino 3,043,011
Fontana 2,258,796
Corona 2,026,588
Rancho Cucamonga 1,664,048
Riverside 1,322,101
Redlands/San Bdno 1,095,995
Temecula 690,299
Montclair/Upland 151,488
Colton/Rialto 34,866
Moreno Vly/Perris 11,500 Source: Grubb & Ellis
Industrial Space, Vacant or Becoming Available, 2003 …
In 4th quarter 2003, the Inland Empire had 19.4 million square feet of vacant industrial space or occupied space
coming on to the market. Of this, only a fraction was in the Colton-Rialto area, 34,866 square feet. This
represented just 0.2% of the available space. This is the case as most of the new projects developed to date have
been build-to-suit (Exhibit 83).
The Inland Empire’s vacancy rate, representing space either vacant or occupied but about to come on to the
market, was 6.9% in fourth quarter 2003. This was up slightly from 6.6% in the third quarter. The Colton-
Rialto market had a vacancy rate of just 0.6% meaning that nearly every square inch of its space was being used
(Exhibit 84).
The Colton market will see its available space and vacancy rate shoot up when Stater Brothers opens its new
facility near San Bernardino International Airport. However, the tightness of the market illustrates why it should
be possible to quickly get this facility reused.
Exhibit 84.-Availability Rate, Industrial Space By Market
Colton & Inland Empire Market Area, 4th Quarter 2003
10.2%
9.1%
8.3%
7.2% 6.9% 6.9% 6.5%
5.9% 5.8%
2.4%
0.6% 0.2%
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Source: Grubb & Ellis
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Section 6 Colton Page 52
Industrial Real Estate
Exhibit 85.-Major Firms Leasing Space For Expansion,
Inland Empire, 1994-2003
Sector Firms Percent Jobs Workers Percent Workers/Firm
Manufacturing 583 52.5% Manufacturing 39,940 41.0% 68.5
Distribution 394 35.5% Distribution 41,160 42.2% 104.5
Service 121 10.9% Service 13,150 13.5% 108.7
Govt. Agencies 12 1.1% Govt. Agencies 3,222 3.3% 268.5
TOTAL 1,110 100.0% TOTAL 97,472 100.0% 87.8
Source Firms Percent Other Square Feet Percent Feet/Worker
Migrate from LA/OR 256 23.1% Manufacturing 41,542,393 31.5% 1,040
New Growth 411 37.0% Distribution 85,279,631 64.7% 2,072
New To Inl. Empire 667 60.1% Service 3,295,052 2.5% 251
Expand Locally 443 39.9% Govt. Agencies 1,642,200 1.2% 510
TOTAL 1,110 100.0% TOTAL 131,759,276 100.0% 1,352
Source: Coldwell Banker, CB Commercial, Grubb & Ellis, Cushman Wakefield, Lee & Assoc., Collins Fuller, IEEP
Characteristics Of Firms . . .
Since 1994, 1,110 major projects have taken new or additional space within the Inland Empire in order to
expand. Of these, 583 have been manufacturing companies (52.5%), 395 have been distributors (35.5%) and
121 have been large service operations or agencies (12.0%) (Exhibit 85). The source of the firms expanding in
the area included 256 migrating from coastal counties (23.1%), 411 either entering the Southern California for
the first time or putting their newest facility in the inland area (37.0%). The other 443 moved within the inland
region to expand (39.9%). The area’s expanding manufacturers have averaged 68.5 workers and used 1,040
square feet of space per worker: Its distributors have averaged 104.5 and used 2,072 square feet per worker.
From 2000-2003, the 26 firms migrating east of the I-15 have largely been distributors and have involved 20.8
million square feet (800,000 average) and created 9,244 new jobs or 2,250 square feet per job (Exhibit 86).
Exhibit 86.-Firms Migrating East of I-15 Freeway, 2000-2003
Firm City Announced Square Feet Jobs Sector
Yellow Freight Systems San Bernardino Jan-00 425,000 350 Distribution
Home Shopping Network Fontana Mar-00 817,750 500 Distribution
Bridgestone/Firestone Fontana Apr-00 323,000 156 Distribution
Ashley Furniture Colton Aug-00 831,000 400 Furniture
Hershey Redlands Nov-00 634,000 150 Distribution
Schwinn/GT Corp. Fontana May-01 323,660 154 Distribution
Excel Logistics Inc. Fontana Jun-01 1,000,000 230 Distribution
Becton, Dickinson & Co. Redlands Sep-01 424,000 80 Distribution
Kohls Logistics Center San Bernardino Oct-01 651,880 900 Distribution
Roadway Express Bloomington Oct-01 250,000 200 Distribution
Ross Stores Perris Nov-01 1,300,000 1,100 Distribution
Excel Logistics Inc. Fontana Jan-02 1,000,000 230 Distribution
Tennant Fontana Feb-02 250,000 120 Distribution
Specialty Manufacturing Corp. Fontana Apr-02 607,000 290 Distribution
Unilever Rialto Jun-02 1,000,000 400 Distribution
Stater Bros. Markets Redlands Jul-02 289,683 140 Distribution
Target Rialto Jul-02 3,300,000 1,400 Distribution
Salton Redlands Sep-02 978,504 470 Distribution
Big Lot Fontana Sep-02 1,200,000 500 Distribution
Converse Fontana Jan-03 250,430 120 Distribution
Ascend Aviation San Bernaridno Mar-03 250,000 140 Charter Air
Holmes Group Fontana Apr-03 827,560 375 Distribution
Mattel, Inc. San Bernardino May-03 1,200,000 135 Distribution
Kellogg USA Fontana May-03 450,000 200 Distribution
Dart Fontana Sep-03 215,000 103 Distribution
Stater Bros. Colton Dec-03 2,000,000 400 Distribution, HQ
Totals 20,798,467 9,244 2,250 SF/Job
Source: Coldwell Banker, CB Commercial, Grubb & Ellis, Cushman Wakefield, Lee & Assoc., Collins Fuller, IEEP
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Section 6 Colton Page 53
Industrial Real Estate
Exhibit 87-Lea se Ra te , I ndustrial S pace
Southern Ca lifornia Marke ts, 200 3
Orange-South $1,890,000
L.A. - North $1,860,000
Orange-Airport $1,830,000
Orange-West $1,710,000
Orange-North $1,620,000
L.A. - Mid Cities $1,470,000
L.A. - South Bay $1,380,000
LA-Central $1,290,000
San Gabriel Vly $1,290,000
Source: Grubb & Ellis
Colton & Rialto $1,145,000
Industrial Lease Rates, 2003. . .
Industrial firms are migrating to the Inland Empire as its facilities are newer and its lease costs are lower. In 3rd
quarter 2003, inland industrial leases average $0.36 per square foot per month or $1,092,500 a year for a
2500,000 square foot facility. In Colton-Rialto, the average was $0.38 or $1,145,000 (Exhibit 87).
In Southern California’s coastal counties lease rates are much higher. A 250,000 square foot building would
lease for $1,290,000 in the San Gabriel Valley, Los Angeles County’s least expensive market ($0.43 sq. ft./mo.),
a $145,000 or 12.7% premium (Exhibit 87). The same space would cost $1,620,000 in northern Orange County,
that area’s cheapest market ($0.54 sq. ft./mo.), a $475,000 or 41.5% premium.
Colton’s relatively inexpensive industrial property is an incentive for Inland Empire firms to migrate its way.
For 250,000 square feet, space is more expensive in large markets like Riverside ($1,260,000), Corona
($1,215,000), Rancho Cucamonga ($1,190,000). Due to heavy demand, newer facilities and limited supply, the
Colton-Rialto space is going for more than the Inland Empire’s average ($1,092,000) (Exhibit 88).
Exhibit 88.-Industrial Spa ce Cost
Inla nd Empire Ma rke ts, 2003
Montclair & Upland $1,500,000
Temecula $1,452,500
Riverside $1,260,000
Corona $1,215,000
Rancho Cucamonga $1,190,000
Perris & Moreno Valley $1,170,000
Chino $1,145,000
Colton & Rialto $1,145,000
Inland Empire $1,092,500
Mira Loma $1,040,000
Ontario $1,040,000
Redlands & San Bdno $985,000
Fontana $957,500
Source: Grubb & Ellis
Victor Valley $930,000
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Section 6 Colton Page 54
