Sublease Market Still Has Wood to Chop
22.2 Million SF of Industrial Sublease Space is Sitting on the Market in Southern California. Here's What the Data is Actually Telling Us.
I've been tracking the sublease overhang in SoCal for months now, as it plays a meaningful role in the recovery stages of the real estate cycle. I pulled every industrial sublease listing over 100,000 SF from CoStar across all five counties: LA, Orange, Ventura, Riverside, and San Bernardino, and built out a full market analysis. 81 properties. 22.2 million square feet. And when you layer in the trailing 12-month absorption data, the picture gets even clearer.
The Four Things That Matter
-- The IE owns the overhang. 74% of all sublease SF sits in Riverside and San Bernardino at $1.01/SF. LA/OC metro commands $1.28, but that premium reflects port proximity and population density, not building quality. Riverside alone has more sublease space than LA, Orange, and Ventura counties combined.
-- The big blocks are the hardest to move. 40% of listings exceed 300,000 SF, but 16 of the 22 deals done last year were under 250,000 SF. At 4.6M SF of annual absorption against 22.2M SF available, this inventory takes roughly 5 years to clear. The math doesn't work without significant rent concessions on the larger availabilities.
-- 54% of the subleases have +32' clear heights. That's a deep pool of modern-spec product hitting the market at below-market rents, giving tenants chasing vertical storage and fulfillment operations more options than they've had in years. If you're a landlord competing for those tenants on a direct deal, the sublease market just became your pricing benchmark.
-- Sublease transaction velocity is accelerating. 7 of the last 22 deals signed in just the past 5 months, which tells me tenants are recognizing the opportunity and sublessors are getting more aggressive on pricing. These are motivated sublessors paying rent on space they don't need, and that urgency is showing up in deal terms. When demand increases more substantially these will clear faster too.
The bottom line: 22.2M SF of sublease availability should be on your whiteboard whether you're a tenant timing a decision or a landlord planning retention.
That's the conversation I have with my clients and why I invest the time to build out these market analyses. Send me a property that you'd like analyzed and we'll give you a 360 degree view of where your property sits and where there is opportunity.
Justin
Justin Smith, SIOR 949.400.4786 jbsmith@lee-associates.com (mailto:jbsmith@lee-associates.com)
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