Blog #Rancho Dominguez

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.

South Bay Submarket Q2 2025 Overview Summary

• Vacancy/Availability: Total vacancy hit 6.4%, the highest since early 2023, with a 70-basis-point quarterly rise; available space reached 19.4 million square feet, up 2.5 million SF since Q4 2024, driven by returning leased properties and slow lease-ups; sublet vacancy rose to 1.0%, hinting at tenant downsizing; absorbing 4.8 million SF is needed to reach a 4% vacancy rate, excluding new deliveries.
• Rental Rates: Asking rents softened to $1.54 NNN per square foot from $1.61 in Q1 and a $1.69 peak in Q2 2024, marking two consecutive quarterly declines since the pandemic recovery; direct rents dropped more than sublet rents, reflecting landlord pressure from rising vacancies and slow leasing; despite high historical levels, tenants are gaining negotiation leverage.
• Construction: Only one building (504,000 SF) was delivered, with the pipeline shrinking to 742,000 SF, down 60% from 1.9 million SF a year ago, due to caution over vacancies, slow leasing, and softening rents; graded sites are on standby awaiting tenants or better conditions; no preleased projects suggest rising vacancy risks if leasing doesn’t improve.
• Leasing Activity/Absorption: Negative net absorption of -1.15 million SF marked a downturn from 544,000 SF last quarter, the third negative quarter in four, indicating tenant contraction; leasing activity fell to 1.12 million SF leased and 84 deals, below the 105-deal historical average, reflecting occupier caution, especially for larger spaces.
• Sales Activity/Investment Trends: Sales totaled 19 transactions at $93.5 million, up from 16 in Q1 but far below $375 million in Q4 2024; the average price per square foot dropped to $211.83, the lowest in over a year, as buyers adjust to vacancies and rents; cautious investor sentiment persists due to delayed Fed rate cuts and tariff uncertainty, though strong fundamentals attract future capital.

The South Bay industrial market faces challenges with rising vacancies, softening rents, and reduced activity, tempered by potential for recovery as market conditions stabilize.

Midcounties, Central, Inland Empire Submarkets also included in report

South Bay Submarket Q1 2025 Overview Summary

• Vacancy/Availability: The vacancy rate rose to 5.6%, up 70 basis points year-over-year, with Carson (7.9%), Compton (9.7%), and Rancho Dominguez (10.8%) seeing the largest increases. High-end properties now take 12.2 months to lease, shifting leverage to tenants. Landlords are offering more concessions, with 10.28 million square feet of vacant/available space. The market needs to absorb 5.1 million square feet to return to a 3% vacancy rate.
• Rental Rates: Average asking rents fell to $1.61 NNN, down 1.4% quarter-over-quarter and 8.0% year-over-year. After a 118% rent surge from Q2 2020 to Q2 2023, increased vacancy (10 MSF added) is driving further declines until leasing rebounds.
• Construction: Construction totals 1.4 MSF, with 360,466 SF delivered in Q1. Seven buildings are under construction, but new starts are limited, and no projects are preleased. Developers are pausing, waiting for tenants or better market conditions, which may increase vacancy if leasing doesn’t improve.
• Leasing Activity/Absorption: Net absorption was positive at 561,683 SF, but cumulative absorption since Q1 2023 is negative at -4.7 million SF. Leasing volume hit 1.3 million SF across 103 transactions, below the historical 2.5 million SF quarterly average. Buildings now take six months to lease.
• Sales Activity/Investment Trends: Investor caution persists due to high interest rates and economic uncertainty, widening the bid-ask spread. Despite lower deal volume, the South Bay attracts capital due to high rents and limited land. The region is poised for an investment rebound as borrowing costs ease.

The South Bay market faces challenges with rising vacancy and declining rents but retains strong fundamentals for future growth.

Additional Reports for Midcounties, Central and Inland Empire Included.

AVAILABLE: ± 36,000 SF Lot Land

BUILDING SIZE: ±18,000SF

ASKING PRICE: $298 PSF ($5,364,000.00)

APN#: 6129-006-020 & 6129-006-021

ZONING: LA Unincorporated M2

• Free Standing Industrial Building

• Fenced/Paved Yard area

• Dock High Possible

• No City Business Tax

• 3 Ground Level Doors/4 Bathrooms

• Solar Lighting

• Bonus Unfinished Mezzanine

• Glass Kiln/Oven

• Close to 110, 405, 91 and 105 Freeways

Available: ±182,746 SF / ±4.2 acres of Land

Price: $9,685,538.00

Zoning: Commercial Automotive

APNs: 7315-012-002, & 7315-012-804

• Carson Auto Row

• Permitted Uses Include Sales, Service, Rental & Leasing of*:  Automobiles, Recreation Vehicles, Trucks, Motorcycles Permitted Uses Click Here

• Potential EV Charging Station

• Close to Southern California Edison Hinson Substation

• Low Business License Fees & Utility Taxes

• Freeway Visibility: ±310,000 Average Daily Volume

_{*Provided special limitations}