Industrial Insights - June 2025: Inland Empire Industrial Market Breakdown
Executive Summary
The Inland Empire industrial market is approaching stabilization. Key indicators show healthy absorption rates, lease rates bottoming out, and existing inventory moderating while new development remains largely paused. Southern California's market recovery is outpacing competing regions like Las Vegas and Phoenix.
Market Summary
The newsletter presents a comprehensive quarterly analysis of leasing trends, vacancy rates, and market dynamics across the Inland Empire region.
Public REITs Performance
Major Southern California real estate investment trusts have reported solid new lease signings, though below previous peaks. The market shows increased tenant interest in third-party logistics providers for operational flexibility, extended lease-up periods, and selective asset sales to owner-occupants at 4-4.5% capitalization rates.
Supply Chain Economics
Tenants are reassessing cost-versus-speed trade-offs amid tariff uncertainties. The analysis notes that "the IE temporarily at parity to Las Vegas...we've even seen a few customers come back" from competing markets. Companies are weighing slower, cost-effective shipping from lower-cost regions against import duties.
Activity Across Size Categories
Sublease inventory remains elevated, driven by sector-specific challenges including tariff-impacted businesses reducing footprints and EV/3PL company closures. The market shows activity across all building sizes, with the 100,000-500,000 square foot range experiencing softest conditions.
Market Bottom Timeline
Industry forecasting estimates reaching "the bottom of this market" within approximately two quarters, contingent on unexpected economic shifts.
