Industrial Insights Newsletter
Industrial Insights — The 18-Month Window
Every distribution executive with a lease expiring in late 2026 or 2027 is asking the same question: how hard should we push right now? The answer depends entirely on where you are.
Every distribution executive with a lease expiring in late 2026 or 2027 is asking the same question: how hard should we push right now? The answer depends entirely on where you are.
I am currently working a 350,000 SF e-commerce facility renewal in Phoenix's West Valley, where the market has transformed so dramatically over the past five years, the Glendale industrial market has roughly quadrupled in size, that landlords and tenants are operating from different assumptions. The tenant wants operational and financial certainty. The landlord is waiting for rents to climb out of the trough. Neither timeline aligns, which is exactly when 18 months of runway becomes a strategic asset rather than a procedural detail.
What makes national tenant work interesting is that the same 350,000 SF requirement produces very different leverage depending on the market. Cycles are not synchronized. Strategies that work in one region fail in another. Here is how that window is expressing itself right now.
The window, market by market
Same requirement, four different kinds of leverage
Phoenix is a timing play
A massive supply wave created real choice, but construction has now pulled back sharply. Leverage exists today because inventory outran demand. There are currently 4 to 5 existing buildings and 4 to 5 build-to-suits available across all the major size ranges from 100,000 to 1,500,000 SF.
The Inland Empire is a choice play
Availability in the 250,000 to 500,000 SF range has expanded meaningfully, concessions are common, and landlords are competing for credit tenants. But with construction starts collapsing, today's options are unlikely to exist 18 months from now. It feels like 10 to 14 months to equilibrium.
Orange County mid box is soft
Surprisingly, no leases over 100,000 SF were signed in Orange County last quarter. Even so, mid-sized availability that is functional and optimal for operations is rare, labor density matters, and the usable inventory is narrower than headline vacancy suggests. Leverage exists, but only for tenants who are precise about their requirements and their timing.
Los Angeles infill is a stabilization play
Rents in Los Angeles are the same this year as they were in 2021, which means a rate reset is underway for certain vintage leases. Because relocating in LA is expensive, racking, permitting, downtime and labor disruption, the real leverage is using the soft market to negotiate economics that make staying the obvious choice, without spending the capital to relocate.
The pattern
One window, closing on the same clock
The pattern across all four markets is the same. Construction pipelines are running at 5 to 8% of their peak, and new starts are still muted. For tenants with 18 months of runway, this is the window. Not next year.
The January email also pointed to Wall Street Journal reporting that data-center construction spending is set to rise about 23% in 2026, even as spending on offices, warehouses, hotels and apartments falls, making data centers the one bright spot in commercial construction. That reporting is the Journal's.
From the desk
Our team has worked in virtually every MSA in this country. What market do you have challenges in? Let us know and we will craft a strategy to bring you the clarity you need to make an informed decision.
Senior Vice President and Principal
Smith Industrial Partners
Lee & Associates — Irvine
9838 Research Dr., Irvine, CA 92618
jbsmith@leeirvine.com
Sources
Analysis by Smith Industrial Partners. Construction-spending outlook: FMI Corp. and BofA Global Research, as reported by The Wall Street Journal, January 2026.