Industrial Insights - Mid Year Report
Earnings Pulse: What Prologis & Rexford Just Told Us About SoCal Industrial
Earnings calls provide opportunities to learn from sophisticated industrial real estate owners in Southern California. This analysis combines insights from company earnings and CoStar research.
Market Pulse — Earnings Season Edition
Prologis Q2 '25 Call – "Short‑term pain, long‑term gain."
CEO Hamid Moghadam highlighted Southern California's negative absorption, yet the regional portfolio maintains 95% occupancy with only a 20 basis point decline. June leasing activity spiked, and the company's development pipeline reached an all-time high, suggesting pent-up demand once tariff uncertainty resolves.
Key takeaways include: - Renewals comprised 75% of Q2 volume, with cost-conscious users extending 2–3 years while awaiting policy clarity - Tariff policy, rather than consumer demand, is the primary drag on the market - Management expects a "snap‑back" once policy stabilizes - Replacement-cost rents continue climbing; vacancy should re-tighten toward the 5% pricing-power threshold over 12-24 months - June tenant proposals are increasing, signaling early signs of pent-up demand heading into Q3
Rexford Industrial Q2 '25 Call – "Occupancy first, price second."
The company reports 91.6% occupancy with activity on 80% of remaining vacancies. Early renewals are double last year's pace.
Notable trends: - Landlords are trading rate for term to fill space; concessions are being offered - Smaller product (under 50 KSF) performs strongest, with average tenant size of 26 KSF - Smaller renewals and extended downtime for large boxes reduce 2026 rollover risk
Bottom line: Southern California industrial is underpriced, but the duration of this opportunity remains uncertain.
Data Watch — CoStar Inland Empire Flash
CoStar's regional lead reported -4 MSF net absorption for the Inland Empire in Q2, the steepest quarterly loss nationally. Vacancy reached 8% (a 15-year high) as major retailers and third-party logistics providers shed over 500 KSF of space. However, construction starts have plummeted, suggesting supply pressure will ease next year.
Translation: The market is likely at least two quarters from stabilizing, with well-capitalized users already acquiring second-generation space.
Featured Opportunities
For Sale: Multi-Tenant Industrial Park, 325–355 S Schnoor Ave, Madera, CA — 144,300 SF, 74 suites averaging 1,950 SF, 88% occupied
Sublease: 1400 Manhattan Ave, Fullerton, CA — 102,016 SF freestanding with 22' clear height and 1,200 amp power through April 2028
Off Market Sale: 1755 Brown Ave, Riverside — 22.1-acre heavy-manufacturing campus with dual steel buildings, utility infrastructure, and rail access
Podcast Spotlight
"Behind the Numbers" features CoStar's Southern California industrial lead discussing vacancy by size category, median months-on-market, actual rent clearance levels, and logistics absorption trends.
Your Next Step
Supply-chain shifts, tariff policy, and rate volatility make 2025 unpredictable. Whether renewing, right-sizing operations, or acquiring investments, strategic site-level planning is essential before Q3 activity increases.
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Contact: Justin Smith, SIOR | Senior Vice President | Lee & Associates | 949.400.4786 | jbsmith@lee-associates.com