Blog #Rancho Dominguez

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}