Q2-2025: SoCal Industrial Market Trends Every Owner Should Know

GM Properties is committed to keeping our clients informed about key trends related to the commercial real estate market in Southern California. Recently, our partner, AIR CRE, held a Town Hall focused on the Q2 2025 Industrial Market, presented by Monique Ebel, Director of Research. The following is a summary of the information provided during the session and in their research report.

Market Overview

Southern California’s industrial market has entered a clear normalization phase. Availabilities continue to rise to new cycle highs, driven by tenant right-sizing, slower deal velocity, and extended lease-up times. While asking rates have softened for seven consecutive quarters, they remain well above pre-pandemic levels. Leasing activity has shown modest improvement, but the balance of power has shifted toward tenants in many submarkets.

Direct Lease Availability

• Existing Listings: 2,221 listings over 10K SF — up 12% YoY and 191% since Q2 2022.
• Square Footage: 1M SF — up 17% YoY and 336% since Q2 2022.
• Newly Added Listings: 542 listings — down 3% YoY; 31.1M SF — down 2% YoY and 29% below the 2023 peak.
• Trend: Elevated availability reflects longer time on market and region-wide inventory build.
• Owner Takeaway: Price to current market conditions and differentiate through upgrades, flexibility, and targeted concessions.

Average Asking Rates

• Direct Lease: $1.45 NNN, down $0.09 YoY (-6%), and $0.20 below the 2023 peak. Still 37% above 2020 levels.
• Trend: Seven consecutive quarters of decline.

Direct Lease Transactions

• Volume: 384 deals (+5% YoY) totaling 21.3M SF (+2% YoY).
• Inland Empire: 11M SF leased (50% of total), 77% in 100K+ SF.
• LA County: 3M SF leased across various sizes.
• OC: 8M SF; Ventura: 190K SF.
• Top IE Deals: Burlington (758K SF), JELD-WEN (715K SF), e.l.f. Cosmetics (616K SF).
• Top LA/OC Deals: Hyperdyne Logistics (205K SF), Paramount Logistics (201K SF), Fairway Business Park (200K SF).

Sublease Market

• Availability: 427 listings (-1% YoY), 36M SF (+1% YoY, +555% since Q2 2022).
• New Additions: 123 listings (-12% YoY), 8.9M SF (-3% YoY).
• Rates: $1.41 NNN (+13% YoY).
• Transactions: 40 deals (-22% YoY), 3.8M SF (-5% YoY), with 74% in 100K+ SF blocks.
• Top IE Subleases: Logistics Plus (600K SF), Confidential (491K SF), Confidential (252K SF).
• Top LA/OC Subleases: Yes Express (446K SF), Justman Packaging (177K SF), Bear Down Brands (148K SF).

Sales Market

• For-Sale Supply: 1,587 listings (+23% YoY), 60M SF (+49% YoY).
• Sales Activity: 371 deals (+3% YoY), 8.4M SF sold (-7% YoY).
• Pricing: $320.28/SF (-2% YoY, +49% from 2020).
• Regional Leaders: LA County (3.3M SF), OC (2.1M SF), IE (2.5M SF), Ventura (345K SF).

Construction Pipeline

• Under Construction: 1M SF (-42% YoY), with IE holding 66% of total.
• Deliveries: 7M SF in Q2 2025 (27% in IE).
• Expected Q3 2025 Deliveries: 5M SF, mostly large projects from the prior cycle.

Strategic Recommendations for Owners

• Price Realistically: Market softening requires accurate rent/sale pricing.
• Capitalize on IE Demand: Target logistics users needing big-box space.
• Mitigate Sublease Competition: Offer flexible lease terms, turnkey conditions.
• Prepare for New Supply: Secure tenants ahead of Q3/Q4 delivery surge.
• Position for 2026: Invest in upgrades now to capture tightening market.

If you would like to discuss how these market dynamics may affect your properties or explore strategies to optimize your asset performance, contact GM Properties. Our property management and brokerage professionals provide the market intelligence, operational oversight, and transactional expertise needed to protect and grow your investment.