Market Report

The San Gabriel Valley (SGV) industrial market showed signs of softening in the first quarter of 2026 after a period of steady improvement throughout 2025. For businesses, investors, and industrial real estate stakeholders in the greater Los Angeles area, understanding these shifts is critical for making informed decisions in one of Southern California’s key logistics and manufacturing hubs.

Key Highlights from the Q1 2026 SGV Industrial Market

• Vacancy Rate: Rose to 6.0% in Q1 2026, up from 4.5% in Q4 2025 and 5.8% in Q1 2025.
• Net Absorption: Turned negative at -1.06 million square feet over the trailing 12 months.
• Asking Rents (NNN): Increased quarter-over-quarter to $15.84 per square foot, though still below the $16.68 recorded a year earlier.
• Construction Pipeline: Continued to taper, with 310,295 square feet under construction — a positive signal that should help moderate future supply pressure.
• Sale Prices: Averaged $300.00 per square foot, with cap rates holding steady at 5.20%.

Despite the quarterly uptick in vacancy and negative absorption, the overall market remains relatively healthy compared to historical norms, with limited new supply coming online.

Market Indicators Trend (Q1 2025 – Q1 2026)

Source: Lee & Associates Q1 2026 Industrial Market Overview

What’s Driving the Market?

The negative net absorption in the trailing 12 months indicates that more space became available than was leased during this period. This contributed to the vacancy increase from the very tight 4.5% level at year-end 2025. However, the quarter-over-quarter rise in asking rents suggests landlords are still holding firm on pricing in a competitive environment.Construction activity slowing to just over 310,000 square feet is encouraging. Reduced future deliveries should prevent a significant oversupply and help stabilize vacancy rates later in 2026.

Notable Transactions in Q1 2026

Top Sales:

• 16253-16293 Gale Avenue, Industry, CA – 124,282 SF sold for $59.4 million ($478.15 PSF) to Aypa Power from ABI Properties, Inc. (Class B)
• 13001 Temple Avenue, Industry, CA – 56,496 SF sold for $15.95 million ($282.32 PSF)
• 250 E. Bonita Avenue, Pomona, CA – 29,960 SF sold for $9.625 million

Top Leases:

• 1025 N. Todd Avenue, Bldg 1, Azusa, CA – 159,067 SF leased to Global Courier Express, Inc.
• 505 S. 7th Avenue, Industry, CA – 120,000 SF logistics lease
• 4818 4th Street, Irwindale, CA – 94,560 SF to Horizon Tires

These transactions demonstrate continued demand from logistics, courier, manufacturing, and specialized industrial users in core SGV submarkets like Industry, Azusa, and Irwindale.

Outlook for San Gabriel Valley Industrial Real Estate

While Q1 2026 reflected some cooling, the San Gabriel Valley remains a vital component of the broader Los Angeles industrial market. Its strategic location, access to major transportation corridors, and established industrial base continue to attract tenants and investors.Lower construction deliveries should provide a buffer against further vacancy spikes. Tenants seeking quality space may find more negotiating room in the near term, while investors focused on value-add or core assets could uncover opportunities amid the current softening.

Get the Full Q1 2026 San Gabriel Valley Industrial Report

For the complete report, detailed charts, additional submarket data, and personalized market insights tailored to your specific needs, contact me directly.

Ron Mgrublian

Lee & Associates 

Lee & Associates provides comprehensive commercial real estate services across the Los Angeles region with deep expertise in industrial properties.

Related Searches:

San Gabriel Valley industrial market report • Los Angeles industrial vacancy rates 2026 • SGV warehouse leasing • Industry CA industrial sales • Pomona industrial real estate trends

Note: Market data reflects Q1 2026 statistics as reported by Lee & Associates Research.

Orange County’s industrial market showed encouraging signs of stabilization in the first quarter of 2026, recording positive net absorption for the second straight quarter.

After 11 consecutive quarters of declining demand totaling nearly 9.5 million square feet, the county posted +540,161 SF of net absorption in Q1. This improvement, led by modest tenant expansion in the Airport and West County submarkets, is welcome news for both property owners and business occupiers.

Key Highlights from the Q1 2026 Report:

• Vacancy Rate: Rose slightly to 6.30% (still well below the national average of 7.5%)
• Average NNN Asking Rent: $18.12 PSF (modest softening from $18.36 in Q4 2025)
• Sale Prices: Increased to $362 PSF, up from $314 PSF last quarter
• Cap Rates: Compressed to 4.84%, reflecting continued strong investor demand
• Under Construction: Dropped sharply to 840,178 SF as new speculative development slows

The county’s total inventory now stands at 305.3 million SF. While available space has increased significantly since 2022 due to new deliveries, the return of positive absorption suggests demand is beginning to catch up with supply in certain areas.

Notable Q1 Transactions:

Top Sales:

• 576,234 SF portfolio at 200 & 250 S. Kraemer Blvd, Brea – Sold for $139 million ($241 PSF)
• 195,617 SF at 415 & 1425 S. Acacia Street, Fullerton – Sold for $46.6 million
• 93,750 SF at Aliso Creek Road, Aliso Viejo – Sold for $41.05 million ($438 PSF)

Top Leases:

• 229,422 SF in Fullerton to Houdini, Inc.
• 132,503 SF in Santa Ana to Cubework
• 100,784 SF in Anaheim to Hyper Solutions, Inc.

What This Means for Owners and Occupiers

For property owners and investors: Rising sale prices and compressing cap rates demonstrate that investor appetite for Orange County industrial assets remains healthy, even in a higher interest rate environment. However, with more vacant space available, leasing velocity and rental growth will require targeted marketing and competitive positioning.

For occupiers and tenants: The current environment offers more options and slightly softer rental rates than the tight market of recent years. Businesses looking to expand or relocate may find improved negotiating leverage, especially in newer or well-located buildings.

Local business leaders continue to highlight geopolitical tensions (including the war with Iran), rising fuel costs, inflation, and interest rates as the biggest challenges facing area companies.

Want the full Q1 2026 Orange County Industrial Market Report?

As a local industrial specialist with Lee & Associates, I have the complete report with detailed submarket breakdowns, additional transaction data, and deeper analysis. Whether you’re an owner evaluating your portfolio, planning a sale, or an occupier considering expansion or relocation, I’d be happy to provide you with a complimentary copy and discuss how these trends impact your specific situation.

Contact me today to request your copy of the full report and to get a personalized market update tailored to your needs.

The Southern California industrial market is entering 2026 with a noticeably different tone than the past few years. After an extended period of aggressive rent growth and tight vacancy, Q1 data shows a market that is recalibrating—offering more flexibility and opportunity for tenants while forcing landlords and investors to adjust expectations.

A Slowing but Stable Economic Backdrop

The broader U.S. economy is sending mixed signals. Growth slowed sharply at the end of 2025, with GDP rising just 0.5% in Q4. While early 2026 projections are more optimistic, underlying demand has softened and inflation remains persistent.

At the same time, the labor market appears stable on the surface, but cracks are forming. Job growth continues, yet long-term unemployment is rising and workforce participation remains muted. Consumer spending—especially e-commerce—continues to support industrial demand, but at a more moderate pace than in prior years.

Logistics Are Being Rewritten in Real Time

One of the most important shifts happening today isn’t just economic—it’s operational.

Cargo flow through the Ports of Los Angeles and Long Beach declined modestly year-over-year in Q1. However, the bigger story is how goods are moving. A growing share of containers—now estimated at 35% to 38%—are leaving ports via on-dock rail rather than local trucking.

This shift is:

• Reducing demand for short-haul warehousing and transloading
• Increasing efficiency for long-haul distribution
• Creating new challenges for drayage operators

In short, logistics is becoming more streamlined—but also more selective in how space is utilized.

Power Is the New Location Driver

A major emerging constraint in industrial real estate is power availability.

With increasing demand from data centers, EV manufacturers, and AI-driven industries, the electrical grid is under pressure. Delivering sufficient power to a site can take 8–10 years due to infrastructure and permitting challenges.

For tenants in aerospace, defense, and advanced manufacturing, this is quickly becoming a deciding factor in site selection—sometimes even more important than location or building specs.

Market Fundamentals: Softening Across the Board

Across all major Southern California submarkets, a consistent theme has emerged: softening fundamentals and increased tenant leverage.

South Bay

• Vacancy increased to 6.3%
• Rents declined to ~$1.47 NNN (down ~9% year-over-year)
• Negative absorption signals reduced demand
• Investment activity remains selective

Mid-Counties

• Vacancy stabilized at 6.4%
• Rents fell to ~$1.28 NNN (down ~11% year-over-year)
• Sales volume dropped significantly, despite stable pricing

Central Los Angeles

• Vacancy tightened slightly to 5.5%
• Rents eased to ~$1.35 NNN
• Market nearing stabilization with balanced conditions

Inland Empire

• Vacancy remains elevated at 8.1%
• Rents declined to ~$0.96 NNN
• High supply levels continue to create competition among landlords

What This Means for Tenants and Owners

For tenants, this is the most favorable environment in years. More available space, declining rents, and increased concessions are creating opportunities to upgrade facilities, renegotiate leases, or expand strategically.

For landlords and investors, the market is demanding a more disciplined approach. Pricing is adjusting, cap rates are expanding, and deal-making requires flexibility and creativity.

Looking Ahead

The remainder of 2026 is expected to bring moderate economic growth, continued e-commerce expansion, and increasing demand from technology-driven industries. However, uncertainty remains elevated due to geopolitical risks, inflation concerns, and infrastructure limitations.

The industrial market isn’t weakening—it’s evolving.

And in this new phase, success will depend on adaptability: understanding shifting logistics patterns, anticipating infrastructure constraints, and aligning real estate strategies with where demand is actually heading—not where it used to be.

Get the Full Report

If you’d like a copy of the complete Q1 2026 Industrial Market Report with detailed data, charts, and property-level insights, feel free to reach out.

Contact me directly to receive your copy or to discuss how these trends impact your real estate strategy.

As we wrap up 2025, the industrial real estate sector across North America faced headwinds from U.S. trade policies and tariffs, leading to softened demand and slower growth. According to Lee & Associates' Q4 2025 Market Report, net absorption, deliveries, and rent increases all decelerated, marking a shift from the post-COVID boom. However, pockets of resilience—especially in logistics-heavy markets—suggest a potential rebound if tariff uncertainties resolve. Here's a breakdown of the highlights, tailored for investors, brokers, and industry watchers.

Overall Market Trends

• Demand Slowdown: U.S. net absorption totaled 112.5 million square feet (SF) in 2025, a 13% drop year-over-year and a staggering 78% decline from the 2021 record of 519 million SF. Over the last three years, annual absorption averaged 137.9 million SF, down from 388 million SF between 2020-2022. In Canada, overall absorption was negative, pushing the vacancy rate to its highest since 2017.
• Supply Moderation: New deliveries reached 253.6 million SF in the U.S., down 52% from 2023's peak. This brings completions back to pre-COVID levels (averaging 211 million SF annually from 2015-2019). Canada saw similar trends, with rent growth slowing to under 2%.
• Rent and Pricing Pressures: U.S. rent growth hit just 1.3%—the lowest since 2011—compared to over 10% in 2022. Warehouse-distribution spaces (68% of the 19.6 billion SF market) saw demand fall 16% from 2024. Uncertainty around tariffs has led to inventory volatility, delaying expansions, though onshoring could boost manufacturing space needs if clarity emerges from upcoming Supreme Court rulings.
• Vacancy and Cap Rates: U.S. vacancy averaged 7.6%, while Canada's was tighter at 4.8%. Cap rates stood at 7.3% in the U.S. and 5.6% in Canada, reflecting varied investor sentiment.

Key risks include oversupply in Sunbelt and Midwest markets like Austin, Indianapolis, Phoenix, and San Antonio, where big-box completions may take years to absorb. On the bright side, top absorption markets included Dallas/Fort Worth (26 million SF), Phoenix, Columbus (OH), Houston, and Indianapolis.

Standout Market Metrics

Here's a snapshot of top performers across key categories (based on CoStar-defined territories; note: Canadian figures in CAD):

Spotlight on Select Markets

The report dives into specific regions, showing varied performance:

• Calgary, AB (Canada): Ended strong with vacancy dropping to 3.14% (from 4.04% in Q3) and Q4 absorption surging to 2.73 million SF. Construction is ramping up (3.77 million SF underway), with big-box leasing driving activity. Sales averaged $192.88/SF, up from prior quarters. Top deals included a 331K SF sale to Minhas Furniture for $41.5M CAD and a 252K SF lease to Modine of Canada.
• Phoenix, AZ (U.S.): Transitioning from rapid growth, with Q4 absorption at 3.44 million SF and vacancy steady at 13.7%. Over 23.5 million SF under construction signals optimism, but tenant selectivity is rising. Rents averaged $13.32/SF NNN, with sales at $201.43/SF. Notable transactions: Walmart's 1.28M SF purchase for $152M and Amazon's 1.06M SF lease.

For Southern California markets like Los Angeles (where vacancy is 6.4%, rents $17.67/SF, and sales $323/SF), the report notes balanced conditions amid broader tariff impacts—ideal for logistics firms eyeing West Coast hubs.

Looking Ahead to 2026

While 2025 was a cooling period, the industrial sector's fundamentals remain solid, especially for e-commerce and supply chain players. Tariff resolutions could spark onshoring, boosting manufacturing demand. Investors should watch oversupplied markets for opportunities as absorption catches up. For the full report contact me directly.

If you're navigating industrial deals in Long Beach or beyond, feel free to reach out, let's discuss how these trends impact your strategy!

As we wrap up 2025, the U.S. and global economies continue to navigate a complex landscape shaped by trade policies, immigration shifts, and geopolitical tensions. In our latest Q4 Economic Report, we dive into the trends defining GDP growth, employment, monetary policy, and the broader global picture. Here's a concise summary of the highlights—perfect for staying informed on how these factors could impact commercial real estate and business decisions.

GDP Growth: A Robust Finish Despite Challenges

The U.S. economy showed remarkable strength in Q4 2025, with the Atlanta Fed's GDPNow model projecting a 5.4% growth rate—the highest since early 2018. This surge was driven by strong consumer spending, a narrowing trade deficit (down 39% to $29.4 billion in October, the lowest since 2009), and positive revisions in personal consumption expenditures (up to 3% in November). Business spending also held steady, with non-defense capital goods orders rising 0.7%.

Productivity jumped 4.9% in Q3, outpacing wage growth and keeping inflation in check. However, analysts note that much of this growth stems from reduced imports rather than pure domestic expansion. Looking ahead, Deloitte warns that tariffs could push core inflation to 3% in 2026, lingering above the Fed's 2% target until 2028 as costs gradually pass to consumers.

Employment: Cooling but Stable Amid Policy Shifts

Hiring slowed significantly in 2025, with only 584,000 jobs added for the year—down from over 2 million annually in prior years. December saw just 50,000 new positions, and revisions lowered October and November figures to 173,000 and 56,000, respectively. The monthly average of 49,000 jobs was the lowest since 2003 (excluding recession years).

Key factors include deportations and immigration enforcement, reducing net immigration from 2.27 million in 2024 to 410,000 in 2025, which reduced the worker supply. This kept the unemployment rate steady at 4.4%. Sectors like health care (713,000 jobs added, averaging 34,000 monthly) and leisure/hospitality (188,000 jobs) led growth, while manufacturing, retail (down 25,000 in December), and warehousing declined.

Fitch Ratings' Olu Sonola cautions that cyclical sectors aren't signaling comfort, and younger workers face higher unemployment due to AI competition and hiring caution tied to tariff uncertainties.

Monetary Policy: A New Era on the Horizon

The Federal Reserve faces a leadership shakeup as President Trump nominates Kevin Warsh to replace Jerome Powell, whose term ends in May. Warsh, a former Fed governor and inflation hawk, is praised for pragmatism but criticized for past attacks on the Fed. Market reactions are mixed; supporters like Canada's Prime Minister Mark Carney call it a "fantastic choice," while others worry about internal tensions.

This comes amid a Supreme Court ruling on presidential removal of Fed governors (e.g., Lisa Cook's case), testing the bank's independence. Warsh's appointment signals potential shifts in asset holdings, policy frameworks, and executive relations—echoing Paul Volcker's inflation-fighting era.

Global Economy: Resilient but Cautious Growth

The IMF projects global growth at 3.3% for 2026 and 3.2% for 2027, slightly up from 2025 estimates, thanks to easing trade tensions. U.S. growth accelerated to 4.3% in Q3, boosted by tech investments, while China slowed to 2.4% due to weak housing but strong exports. Europe varied: France grew 2.2% on aerospace, Germany stagnated, and Japan contracted 2.3%.

Trade volume is expected to dip to 2.6% in 2026 before rebounding, with policy uncertainty lower but still elevated. Oil prices may fall 7% due to oversupply, and bilateral deals add complexity. Overall, the world economy remains adaptable, with tech-driven exports providing a buffer.In summary, Q4 2025 paints a picture of U.S. resilience amid policy headwinds, with global stability hinging on trade resolutions. For commercial real estate stakeholders, these trends underscore opportunities in health care and tech sectors, while cautioning on inflation and labor shortages.

If you'd like a full copy of the Q4 2025 Economic Report, feel free to contact me directly at Lee & Associates.

Ron Mgrublian, Lee & Associates Commercial Real Estate Services

As we wrap up 2025, the San Gabriel Valley (SGV) industrial submarket is demonstrating clear momentum toward recovery after a couple of challenging years marked by rising vacancies and negative absorption. Here at Lee & Associates, we're excited to share the latest insights from our Q4 report, highlighting positive shifts that could signal stronger days ahead for tenants, landlords, and investors alike.

This overview paints an optimistic picture: vacancy rates have dipped to 5.2% from 6.2% at the end of 2024, bolstered by over 2 million square feet of positive net absorption throughout the year. Leasing activity has remained robust, with more than 9.7 million square feet transacted across 638 deals—indicating that tenants are confidently re-entering the market even as availability sits at 6.8%. Construction activity is modest at just 529,985 square feet under way, with new deliveries slowing down significantly. Meanwhile, direct average triple-net rents have moderated to $15.48 per square foot, creating a more competitive and balanced environment for all parties.

Key Market Indicators

To give you a snapshot of the quarter-by-quarter trends, here's a breakdown of the core metrics for 2025 compared to Q4 2024:

These figures underscore the submarket's stabilization. While Q4 saw a slight dip in net absorption, the full-year positive trend is a welcome reversal from 2024's challenges. Rents have adjusted downward, which may attract more cost-conscious tenants, and cap rates are holding steady around 5%, reflecting investor confidence.

Net Absorption, Deliveries, and Vacancy Trends

The SGV's recovery is perhaps best illustrated by its absorption and vacancy patterns. After negative absorption in recent years, 2025 brought a surge of positive activity, reducing vacancy by a full percentage point. Limited new deliveries have helped keep supply in check, preventing further upward pressure on vacancy rates. If this trajectory continues, we could see even tighter conditions in 2026, potentially driving rents back up.Construction remains subdued, with only about 530,000 square feet in the pipeline—a far cry from the more aggressive development seen in prior cycles. This cautious approach from developers is likely a response to economic uncertainties, but it positions the market well for organic demand growth.

Notable Sale Transactions

Investment activity picked up steam in Q4, with several high-profile deals showcasing strong interest in Class A and B properties. Here's a look at the top sales by square footage:

*Part of a portfolio sale.These transactions highlight the appeal of well-located industrial assets in Industry and surrounding areas, with prices per square foot climbing north of $240 in some cases.

Top Lease Transactions

Leasing was equally dynamic, with eCommerce, advertising, and freight sectors leading the charge. Key deals included:

These leases reflect diverse industry demand, from online retail to logistics, and underscore SGV's strategic position in Southern California's supply chain ecosystem.

Looking Ahead

As we head into 2026, the San Gabriel Valley industrial market appears poised for continued improvement. With vacancy trending downward and leasing activity holding strong, opportunities abound for businesses seeking space in this vital region. If you're navigating the market—whether as a tenant, owner, or investor—Lee & Associates is here to provide expert guidance tailored to your needs.

For more details or to discuss how these trends impact your real estate strategy, feel free to reach out to me, Ron Mgrublian, at Lee & Associates.

To receive the full Q4 2025 San Gabriel Valley Industrial Market Report (including detailed charts, net absorption trends, and additional insights), contact me directly.

Positive Tenant Demand Ends 11-Quarter Contraction 

Orange County’s industrial market showed clear signs of stabilization in the fourth quarter of 2025, posting its first positive net absorption in nearly three years and officially ending the county’s longest contraction on record. 

Key Highlights – Q4 2025 

• Net Absorption: +316,406 SF (first positive quarter since Q4 2022)
• Full-Year Net Absorption: –1.8 million SF
• Vacancy Rate: 6.30% (up from 5.20% one year ago, but still below the national average of 7.6%)
• Average NNN Asking Rate: $18.36 PSF
• Average Sale Price: $318 PSF
• Cap Rate: 5.88%
• Space Under Construction: 1.59 million SF
• Total Inventory: 304.2 million SF

After 11 consecutive quarters of negative absorption totaling 9.3 million SF (3.4% of total inventory), positive tenant demand finally returned in Q4. While vacancy has risen from a record-low 1.8% to 6.3%, Orange County remains one of the nation’s strongest and most sought-after industrial markets thanks to its proximity to the Ports of Los Angeles and Long Beach and dense Southern California consumer base.

 Market Indicators Trend (2025) 

 Notable Transactions Q4 2025

Top Sales 

• 2164 N. Batavia Street, Orange – 249,431 SF sold for $69.6M ($279 PSF) – Class A
• 17352 Armstrong Avenue, Irvine – 123,748 SF sold for $17M ($137 PSF) – Class C
• 2601 S. Garnsey Street, Santa Ana – 122,407 SF sold for $31.8M ($260 PSF) – Class C

 Top Leases 

• 2164 N. Batavia Street, Orange – 246,732 SF to Paper Mart (Packaging Wholesale)
• 17352 Armstrong Avenue, Irvine – 123,748 SF to Fletcher Jones (Retailer)
• 15345 Barranca Parkway, Irvine – 84,580 SF to Undisclosed Tenant

 What It Means for Occupiers & Investors 

• Occupiers: Rental rates have moderated slightly, giving tenants more negotiating power than they had in 2021–2023. Availability is up, especially in Class B and C product.
• Investors: Sale prices are down and cap rates have expanded ~150 bps year-over-year, creating more attractive entry points in a market that historically delivers strong long-term performance.
• Developers: The pipeline has shrunk 22% from Q3, signaling that new supply is finally tapering as demand stabilizes.

 Outlook 

The return to positive absorption in Q4 2025 is a major inflection point. While full recovery will take several quarters, Orange County’s strategic location, limited new supply, and enduring tenant demand position the market for gradual improvement through 2026.

For the full Q4 2025 Orange County Industrial Market Report contact me directly.

As we wrap up 2025 and look ahead to 2026, the Southern California industrial market continues to demonstrate resilience amid evolving economic conditions. At Lee & Associates, we're excited to share our latest quarterly report, which dives deep into macroeconomic drivers, port activity, and submarket fundamentals across South Bay, Midcounties, Central LA, and the Inland Empire. This blog post provides a high-level summary of the key findings—think of it as your quick guide to the trends shaping industrial real estate in SoCal. For the full details, including charts, data tables, and in-depth analysis, reach out to me directly. I'd be happy to send you the complete PDF report.

Macroeconomic Drivers Fueling Industrial Demand

The U.S. economy showed strength in 2025, with real GDP accelerating to a 4.3% annual rate in Q3—the fastest in two years—driven by consumer spending, exports, and government outlays. Employment growth slowed, adding just 50,000 jobs in December, keeping the unemployment rate steady at 4.4%. Retail and e-commerce sales remained robust, with total retail up 3.3% year-over-year in November and e-commerce growing 5.1%, accounting for 16.4% of retail activity.Key warehouse occupiers in Q4 included:

• Third-Party Logistics (3PL) Providers: Dominating 35% of leasing, as retailers outsource for flexibility amid trade risks.
• Advanced Manufacturing: Boosted by nearshoring in semiconductors and EVs.
• E-commerce & Omnichannel Retailers: Shifting to smaller urban warehouses for faster deliveries.
• Tech Companies: Leasing big for AI-driven data centers.
• Automotive, Construction, and Food & Beverage: Showing renewed activity with improving housing starts and modern facilities.

Looking to 2026, GDP is projected to grow 2.7%, supported by fiscal stimulus and easing rates, though inflation lingers above 2% and trade policies remain uncertain.

LA & Long Beach Ports: Still the Nation's Trade Powerhouses

SoCal ports handled elevated container volumes in 2025, with LA and Long Beach leading despite year-over-year declines in Q4. LA's total TEUs dropped 14.11% quarterly, while Long Beach saw an 8.82% dip. Inbound loads remained strong, but empties and exports contributed to the slowdown. West Coast gateways continue to anchor U.S. throughput, driving industrial demand in nearby submarkets.

Submarket Spotlights: Trends, KPIs, and Deals

South Bay: Gateway Stability with Modest Easing

Vacancy ticked up to 6.1% (from 6.0% in Q3), with positive net absorption of 90,662 SF offsetting 60,558 SF in deliveries. Under construction: 324,921 SF. Asking rents stabilized at $1.52 NNN, up quarterly but down annually. Sales volume surged to $370.5M, driven by institutional deals.

Top Leases:

• Vie Logistics: 389,097 SF in Rancho Dominguez (Third-Party Logistics)
• Morrison Express: 219,575 SF in Compton (Freight Forwarding)

Top Sales:

• Clarion Partners: 1,008,837 SF portfolio in Compton/LA for $412M
• Morgan Stanley: 143,060 SF in LA for $211.4M

Trends: Availability rose to 6.1%, signaling a balanced market; investment focused on quality assets.

Midcounties: Tight Corridor Loosening Slightly

Vacancy rose to 6.8% (from 6.3%), with 191,874 SF net absorption and 493,874 SF delivered. Under construction: 28,320 SF. Rents held at $1.33 NNN, up quarterly but 11% below last year. Sales cooled to $81M across eight deals.

Top Leases:

• FedEx: 516,124 SF in Downey (Parcel Delivery)
• Peak Logistics: 117,774 SF in Santa Fe Springs (Third-Party Logistics)

Top Sales:

• 3 Industrial: 303,754 SF portfolio in La Mirada for $55M
• World Trade Printing: 89,873 SF in La Mirada for $23.4M

Trends: Direct space drove vacancy uptick; investors remain selective with cap rates at 4.7%.

Central LA: Dense Corridor Showing Signs of Balance

Vacancy dipped to 5.6% (from 6.0%), thanks to strong 1,287,891 SF net absorption and no new deliveries. Under construction: 486,333 SF. Rents softened to $1.40 NNN, flat year-over-year. Sales volume rose on larger deals, with cap rates compressing to 5.4%.

Top Leases:

• Amazon: 615,000 SF in Commerce (E-Commerce)
• Sport Dimension: 132,642 SF in South Gate (Sporting Goods)

Top Sales:

• Hines REIT: 717,065 SF in LA for $287M
• Atlas Capital: 648,000 SF in LA for $241.5M

Trends: Absorption stabilized vacancy; market bifurcated toward infill quality.

Inland Empire: Big-Box Hub Normalizing

Vacancy climbed to 8.1% (from 7.6%), but net absorption rebounded to 2,186,058 SF amid 1,065,546 SF deliveries. Under construction: 6,791,711 SF—the highest pipeline. Rents stabilized at $0.99 NNN, down annually. Sales moderated to lower volumes and $208/SF pricing.

Top Leases:

• Hankook Tire: 754,392 SF in Fontana (Automotive)
• RJW Logistics: 656,695 SF in Perris (Third-Party Logistics)

Top Sales:

• Rexford Industrial: 1,101,400 SF in Fontana for $365M (Sale-Leaseback)
• Costco: 1,613,290 SF in Ontario for $345M (Owner-User)

Trends: Supply growth outpaced demand, but positive absorption signals steady logistics interest.

Final Thoughts and Next Steps

Overall, the SoCal industrial market in Q4 2025 reflected a transition toward balance: softening rents, rising vacancies in some areas, but resilient demand from logistics, e-commerce, and manufacturing. Ports remain a key driver, and with 2026's projected growth, opportunities abound for savvy investors and occupiers.

This is just a teaser— the full report includes detailed charts on rent trends, port volumes, and more. If you'd like the complete PDF or have questions about how these insights apply to your industrial needs in Long Beach or beyond, don't hesitate to reach out. Contact me, Ron Mgrublian, at Lee & Associates: rmgrublian@lee-associates.com. Let's connect and discuss your next move!

The industrial real estate sector is shifting from large-scale warehouses to small-bay industrial properties (2,000–10,000 sq ft), which are emerging as a resilient, high-performing asset class driven by structural demand and favorable fundamentals.

Key Market Fundamentals

• Vacancy: Small-bay vacancy at 4.2% vs. 7.4% for large-scale industrial.
• Rent Growth: Small-bay rents up >40% since 2020, far outpacing broader industrial growth.
• Tenant Stability: Shorter leases, high retention, and "sticky" tenants who expand/contract within parks.
• Operational Advantages: Lower maintenance, scalable portfolios, and diversification reduce risk.

Demand Drivers

• Reshoring & Local Logistics: Proximity to customers supports service trades, contractors, and regional distributors.
• Small Businesses: Over 36 million U.S. small businesses (nearly 50% of private-sector jobs) fuel consistent demand.
• Last-Mile & Urban Infill: Rising fulfillment costs push tenants toward efficient, right-sized spaces.

Hotspot Markets (U.S. & Canada)

Investment Momentum

• Q2 2025 Sales: Properties <150K sq ft = 62% of industrial transaction volume ($5.89B in $5–25M range).
• Pricing: Small-bay sale prices up 55% since Q3 2020 (avg. $104/psf in Eastern PA/NJ).
• Investor Profile: Strong local/regional buyer activity; off-market deals dominate to avoid bidding wars.
• Institutional Interest: Growing but still a local landlord’s game.

Strategic Outlook

• Scarcity is Structural: Zoning, land constraints, and high construction costs limit new supply.
• Risk Mitigation: Diversified tenant base and short leases hedge against volatility.
• Caution: Rising rents causing tenant pushback in overheated markets — credit diligence critical.

Conclusion

Small-bay industrial is no longer a niche — it’s the connective tissue of modern industrial real estate. With systemic supply constraints, secular demand trends, and superior risk-adjusted returns, it offers investors agility, durability, and alpha in an evolving cycle.

“The next decade won’t be about size. It will be about agility, adaptability, and execution.”

Market Summary

• Demand Softening: Industrial demand continued to ease in Q3, with negative net absorption of -850,291 SF — the largest quarterly loss in 2025 and the 11th consecutive quarter of tenant contraction.
• Vacancy Surge: Countywide vacancy rose to 6.6%, the highest since the Great Recession (up from 1.8% over the past 11 quarters).
• Lease Rates Declining: Average NNN asking rate fell to $18.12 PSF (down from $19.20 PSF in Q3 2024).
• Tenant Concessions at Peak: Landlords offering maximum incentives to attract tenants.
• Bright Spot: Increased activity in 100,000–200,000 SF distribution & manufacturing spaces.

Key Market Indicators (Q3 2025 vs Prior Quarters)

Top Lease Transactions (by SF)

Top Sale Transactions (by SF)

Outlook

• Rising vacancy and falling rents signal a tenant-favorable market.
• Sales activity remains resilient, with average sale prices up 10% YoY despite higher cap rates.
• Construction pipeline cooling (down ~24% from Q2), potentially stabilizing supply in 2026.

Source: Lee & Associates Research, CoStar, U.S. Bureau of Labor Statistics | © 2025

Q3 2025 San Gabriel Valley (SGV), CA Industrial Market Summary

Market Recovery Signs

• Vacancy Rate: Down to 5.3% (from 6.4% in Q3 2024), with YTD improvement to 5.4% from 6.2% in 2024.
• Net Absorption: Strong rebound with +1.56M SF YTD; 12-month total at +2.12M SF (vs. -1.78M SF in Q3 2024).
• Leasing Activity: Robust at ~9M SF across 539 deals, indicating tenant re-entry despite elevated availability (~6.4%).

Rents & Pricing Trends

• Avg NNN Asking Rent: $1.29 PSF, down from $1.49 PSF (Q3 2024) — reflecting landlord competition.
• Sale Price PSF: $240.24, down from $285.03 in Q2 2025.
• Cap Rate: Compressed to 4.8% (from 6.1% in Q3 2024), signaling rising investor confidence.

Supply & Development

• Under Construction: 617K SF — limited pipeline, new deliveries slowed significantly.
• Total Inventory: 177.75M SF, stable with minimal additions.

Top Lease Transactions (by SF)

Top Sale Transactions (Portfolio Deal by TA Realty)

Outlook: SGV industrial market is stabilizing with improving fundamentals, strong leasing, and moderating rents. Low construction and positive absorption support a tenant-favorable but recovering environment.

Source: Lee & Associates Research, Q3 2025

Overview

The "Industrial Market Insights Q3 2025" report by Lee & Associates analyzes the Southern California industrial real estate market, focusing on the South Bay, Midcounties, Central, and Inland Empire submarkets. It highlights macroeconomic drivers, trade trends, port activity, and submarket-specific fundamentals like vacancy rates, net absorption, rents, construction, and top transactions. Overall, the market shows softening conditions with rising vacancies, declining rents in some areas, and stabilizing investor activity amid economic moderation. Ports of Los Angeles (LA) and Long Beach (LB) remain dominant U.S. trade gateways, though competition from East/Gulf Coast ports intensifies.

Macroeconomic Drivers

• GDP: Real GDP grew 3.8% annualized in Q2 2025, rebounding from a 0.6% Q1 decline, driven by consumer spending and reduced imports. Q3 growth is projected at ~3%.
• Employment: Unemployment rose to 4.3% in August, with only 22,000 jobs added (downward revisions to prior months). Wage growth of 3.7% year-over-year supports consumer spending.
• Retail & E-Commerce Sales: E-commerce sales hit $304.2B in Q2 (up 1.4% QoQ, 5.3% YoY), representing 16.3% of total retail sales ($1.87T, up 0.4% QoQ, 3.9% YoY).
• Trade Partners: Mexico leads U.S. trade at 21%, followed by Canada (17%) and China (10%). Top 15 partners account for 74.2% of activity.
• Year-End Outlook: GDP growth ~2.6% annualized in Q4, with stable consumer spending despite labor cooling and a government shutdown. Moderate expansion and cooling inflation bode well for 2026 commercial real estate.

Port Activity

LA and LB ports handled ~41% of U.S. imports by TEU market share. West Coast ports lead in throughput, but East/Gulf ports (e.g., NY/NJ, Houston) are gaining.

Submarket Summaries

South Bay

• Fundamentals: Vacancy rose to 6.9% (from 6.3% in Q2). Net absorption negative at (757,229) SF. Deliveries: 429,112 SF. Under construction: 244,786 SF.
• Rents & Sales: Average NNN rent fell to $1.48/SF (down 8.5% YoY). Building sales averaged $291/SF (cap rate 6.4%).
• Market Trends: Softening conditions with higher availability (9.5%); tenant-favorable market. Investment slowed (13 deals, $75.4M volume).
• Top Leases (all new): 19801 S Santa Fe Ave (356,642 SF, Confidential); 901 E 233rd St (221,050 SF, Custom Goods); 20846 Normandie Ave (203,877 SF, Hadrian Inc).
• Top Sales: 3700-3730 Redondo Beach Blvd (99,377 SF, $35.5M, Investment); 2959 E Victoria St (54,500 SF, $23M, Owner-User).

Midcounties

• Fundamentals: Vacancy fell to 7.3% (from 8.0% in Q2). Net absorption positive at 678,807 SF. Deliveries: 0 SF. Under construction: 493,874 SF.
• Rents & Sales: Average NNN rent at $1.30/SF (down 16% YoY). Building sales averaged $259/SF (cap rate ~5.0%).
• Market Trends: Stabilizing with lower direct vacancy; availability at 9.8%. Investment slowed (17 deals, $148.2M volume).
• Top Leases: 15614-15700 Shoemaker Ave (521,091 SF, Breakthru Beverage CA, New); 8201 Sorensen Ave (234,330 SF, Rove Concepts, Renewal).
• Top Sales: 6259 Descanso Ave (54,000 SF, $17.4M, Owner-User); 14390 Marquardt Ave (31,308 SF, $17M, Owner-User).

Central

• Fundamentals: Vacancy rose to 7.1% (from 6.8% in Q2). Net absorption negative at (465,078) SF. Deliveries: 157,715 SF. Under construction: 749,742 SF.
• Rents & Sales: Average NNN rent steady at $1.41/SF. Building sales averaged $295/SF.
• Market Trends: Slight softening; availability at 8.5%, occupancy 92.9%. Steady sales (25 deals, $190.4M volume).
• Top Leases: 8500 Rex Rd (335,600 SF, Million Dollar Baby Classic, New); 4885 E 52nd Pl (210,347 SF, Uniuni, New).
• Top Sales: 4400 Pacific Blvd (253,200 SF, $48.8M, Investment); 7400 Bandini Blvd (94,937 SF, $38.5M, Owner-User).

Inland Empire

• Fundamentals: Vacancy rose to 8.9% (from 8.1% in Q2). Net absorption negative at (746,596) SF. Deliveries: 5,299,580 SF. Under construction: 6,036,579 SF.
• Rents & Sales: Average NNN rent up to $1.00/SF (from $0.98 in Q2, down 12% YoY). Building sales averaged $252/SF (cap rate 5.9%).
• Market Trends: Balancing with high availability (12.3%); occupancy ~91%. Investment surged (55 deals, $777.2M volume).
• Top Leases: 5690 Industrial Pky (844,311 SF, iDC Logistics, New); 13052 Jurupa Ave (827,578 SF, Elogistek, New).
• Top Sales: 11991 Landon Dr (765,456 SF, $208.76M, Investment); 22491 Harley Knox Blvd (348,375 SF, $90.6M, Investment).

The report emphasizes logistics and manufacturing as key industries in transactions, with a tenant-favorable shift prioritizing occupancy over rent growth. Data sourced from AIR CRE, CoStar, and internal databases.