Southern California’s industrial market held its ground in Q3 2026. Availability stayed at 5.3% in the South Bay and fell to 5.0% in Central, its lowest level since late 2023. Mid-Counties recorded its highest quarterly sales volume in four years. In the Inland Empire, absorption rebounded sharply, but availability still rose as new buildings came online. Behind it all, the Ports of Los Angeles and Long Beach handled more containers in September than in any month in their history.
The Bigger Picture
The U.S. economy grew at a 2.2% annual rate in Q2 2026, down slightly from 2.5% in Q1. Inflation has picked up. The Consumer Price Index rose 3.7% year over year in September, driven mainly by energy prices, which are up 20.4% from a year ago. Diesel is near record highs at an average of $6.28 per gallon, up 70% since the Iran war began.
The Federal Reserve raised its benchmark rate by 25 basis points to a range of 3.75% to 4.00% in September, and another increase is expected in December. The 10-year Treasury yield reached 5.36% in early October, its highest level in 24 years, and is expected to stay above 5% into 2027. That keeps borrowing costs elevated for commercial real estate buyers.
Hiring has slowed. Employers added only 29,000 jobs in September, and the unemployment rate rose to 4.2%. Consumer spending held up, though. Retail sales rose 6.3% year over year in September. Online sales grew 12.2% in Q2, and e-commerce’s share of total retail sales reached 17.1%, which continues to support demand for distribution space.
Port Volume Hits New Records
The Ports of Los Angeles and Long Beach handled about 5.80 million TEUs in Q3 2026, up 5.4% year over year.
September set all-time monthly records at both ports. Los Angeles handled 1,042,652 TEUs, and Long Beach handled 997,177 TEUs.
Power Is the New Clear Height
With diesel up 70% since the Iran war began and the ports moving record volume, the cost of hauling containers is under pressure. That’s speeding up the move to electric trucks. The Ports of Los Angeles and Long Beach and the South Coast Air Quality Management District have agreed to set planning targets for electric drayage trucks and to develop plans for charging infrastructure.
The South Bay already has the region’s largest heavy-duty charging depot. Prologis and Maersk’s Performance Team opened a 9-megawatt hub in Torrance that can charge up to 96 trucks at once. Getting enough power is the hard part. Utility upgrades can take two to ten years, so the Torrance depot relies on an on-site microgrid for 6 of its 9 megawatts.
For owners and tenants, available power is becoming as important as clear height and dock doors. Buildings that can deliver power sooner will be best positioned for the next wave of port-related demand.
Q3 2026 Submarket Snapshot
| Submarket | Availability | Net Absorption | Asking Rent (NNN) | Avg. Sale Price/SF | Under Construction |
|---|---|---|---|---|---|
| South Bay | 5.3% | 847,509 SF | $1.45 | $259.17 | 779,436 SF |
| Mid-Counties | 6.1% | (331,671) SF | $1.25 | $230.29 | 446,464 SF |
| Central | 5.0% | 562,781 SF | $1.35 | $217.30 | 355,760 SF |
| Inland Empire | 8.0% | 3,373,656 SF | $0.98 | $229.27 | 11,520,650 SF |
Source: Lee & Associates Los Angeles-Long Beach, AIR CRE, CoStar
South Bay
South Bay availability held at 5.3% in Q3, unchanged from Q2 but down from 6.0% a year ago and well below the 6.4% peak in Q1 2026. Net absorption rose to 847,509 SF, up from 531,247 SF last quarter. Asking rents held at $1.45/SF NNN, a sign that rents are stabilizing after several years of declines.
Investment activity was mixed. Fourteen sales totaled about $123.7 million, down from Q2 but up 54.1% from a year ago. Average pricing fell to $259.17/SF, while average cap rates dropped to 6.0% from 6.4% a year earlier. With so few sales each quarter, averages can swing widely from one quarter to the next.
Notable South Bay transactions:
Mid-Counties
Mid-Counties availability edged down to 6.1%, the third straight quarterly decline. Net absorption remained negative at (331,671) SF. Asking rents rose to $1.25/SF NNN from $1.22, mostly because sublease rents bounced back. Rents for direct space slipped slightly.
Investors were very active. Twenty-seven sales totaled about $524.5 million, up 53.5% from Q2, more than triple the volume of a year ago, and the highest quarterly total since Q3 2022. Average pricing was $230.29/SF, and cap rates averaged 5.5%.
Notable Mid-Counties transactions:
Central
Central availability fell to 5.0%, its lowest level since Q4 2023. Net absorption rebounded to 562,781 SF from (1,159,126) SF in Q2. Asking rents ticked up to $1.35/SF NNN, the first quarterly increase since Q2 2025.
Sales slowed. Thirteen transactions totaled about $118.3 million, the fewest deals since Q1 2024. Average pricing fell to $217.30/SF, though the median price rose from a year ago. Buyers are still interested but are being selective.
Notable Central transactions:
Inland Empire
Inland Empire availability rose to 8.0% from 7.8%, just below its 8.1% peak. That happened even though net absorption rebounded to 3,373,656 SF. Construction jumped to 11.5 million SF, the most of any submarket, so new space continues to outpace demand. Asking rents held at $0.98/SF NNN.
Investors stayed active. Sixty sales totaled about $976.9 million, up 9.1% from a year ago. Average pricing rose to $229.27/SF, and cap rates averaged 5.2%, down from 5.9% a year earlier.
Notable Inland Empire transactions:
What This Means for Owners and Tenants
The coastal markets, South Bay and Central, have stabilized. Availability is near multi-year lows, and rents have stopped falling. Owners there have more negotiating leverage than they’ve had in two years, especially for buildings with good power, loading, and yard space.
Mid-Counties is drawing heavy investment, and buyers are moving on attractively priced buildings even with rising interest rates. In the Inland Empire, 11.5 million SF under construction means tenants will keep plenty of options and negotiating room into 2027.
For all owners, higher interest rates and a 10-year Treasury yield above 5% mean buyers are underwriting carefully. Lease terms, rent compared with today’s market, and building features matter more than market averages.
What’s Your Industrial Property Worth?
Recent sales show a wide range of prices, from under $200/SF to over $500/SF, depending on building size, condition, location, and lease terms. If you own industrial property between the Ports of Los Angeles and Long Beach and the Inland Empire, I can prepare a Complimentary Valuation based on current sales and leasing activity. It’s useful if you’re thinking about selling, planning a 1031 exchange, or just want to know where your property stands.
Request a Complimentary Valuation
Frequently Asked Questions
Which submarkets does this report cover?
This report covers the South Bay, Mid-Counties, Central Los Angeles, and Inland Empire industrial markets.
Which submarket has the lowest availability?
Central had the lowest availability at 5.0% in Q3 2026, followed by the South Bay at 5.3%.
Are industrial rents still falling?
Rents appear to be stabilizing. South Bay and Inland Empire rents were unchanged from Q2, and Central and Mid-Counties rents ticked up. All four markets are still slightly below where they were a year ago.
How did the ports perform in Q3 2026?
The Ports of Los Angeles and Long Beach handled about 5.80 million TEUs, up 5.4% year over year. Both ports set all-time monthly records in September, and Los Angeles had its busiest quarter on record.
How are rising diesel prices and interest rates affecting industrial real estate?
Diesel prices are up 70% since the Iran war began, which raises the cost of moving goods and is speeding up the move to electric trucks near the ports. The Federal Reserve raised rates in September, and the 10-year Treasury yield reached a 24-year high. Buyers are still active, especially in Mid-Counties and the Inland Empire, but they are underwriting more carefully.
Why does power matter for industrial buildings?
As trucking fleets serving the ports move to electric trucks, buildings with available power are becoming more valuable. Utility upgrades can take two to ten years, so buildings that already have strong power have an advantage.
How can I find out what my industrial property is worth?
Request a Complimentary Valuation and I’ll prepare an estimate based on recent sales and leasing activity for your property.
We specialize in industrial real estate from the greater Los Angeles to the Inland Empire markets, including: Long Beach, Carson, Torrance, Gardena, Compton, Rancho Dominguez, Wilmington, Paramount, Santa Fe Springs, Huntington Beach, Garden Grove, Irwindale, Signal Hill, Pomona, City of Industry, and Ontario, serving surrounding submarkets including LA South Bay, LA Central, Mid-Counties, San Gabriel Valley, Orange County and the Inland Empire.
Ron Mgrublian
Principal
562-354-2537
CalDRE# 01902882
