Local commercial real estate market booming The current increase in the region's business activity represents a solid jump over growth in the 2nd quarter (1.6%) but a significant decline in growth from previous quarters (4.7% in the 1st quarter and 6.4% in the 4th quarter of 2021). 'While we are now seeing some weakness in the residential real estate market, that has been largely offset by impressive growth in employment, the labor force, consumer spending, building permits, and commercial real estate.' Surprisingly, given the pandemic-driven shift towards remote work, the category enjoying the largest growth is office property. Building permits for new office space in the Inland Empire surged nearly 380%, pushing the total year-to-date value for new commercial real estate in the region 205.7% above 2021 levels. Moreover, many existing firms have opted to improve or expand their space as illustrated by a 46% annual jump in non-residential alterations and additions. Office properties continue to surprise with vacancies increasing only 0.2 percentage points since the 1st quarter of 2020. Retail property, on the other hand, has exhibited the effects of being disrupted by the rise in e-commerce spending and experienced the largest jump in vacancies (0.6 percentage points). Unsurprisingly, given the escalation in e-commerce, warehouse and distribution property has watched its vacancy rate decline a massive 9.1 percentage points since the 1st quarter of 2020 despite nearly 35 million square feet of new space coming online over the same period.