Q3 2025: Inside the Southern California Industrial Market

GM Properties continues to keep our clients informed on the latest market trends shaping Southern California’s commercial real estate landscape. Recently, our partner, AIR CRE, held its Q3 2025 Research Insights Town Hall presented by Monique Ebel, Director of Research. The following summarizes key data and insights from the session and accompanying research report.

Market Overview

Southern California’s industrial market continues its correction phase, with direct lease availability reaching a new high. Slower tenant demand, extended lease-up periods, and a cautious approach from developers are defining this cycle. Asking rates have declined for eight consecutive quarters, while sublease and sale activity remain active but below prior-year peaks. Despite the moderation, long-term fundamentals remain solid across LA, OC, Ventura, and the Inland Empire.

Direct Lease Availability

• Existing Listings: 2,259 listings over 10K SF — up 11% YoY and 260% since Q4 2021.
• Square Footage: 0M SF — up 17% YoY and 370% since Q4 2021.
• Newly Added Listings: 499 listings — down slightly QoQ but up 2% YoY; totaling 31.6M SF (+18% YoY).
• Trend: Rising inventory driven by slower absorption and continued right-sizing.
• Owner Takeaway: Adjust expectations to current market conditions; prioritize flexibility, improvements, and targeted concessions to reduce time on market.

SOUTHERN CALIFORNIA INDUSTRIAL DIRECT LEASE AVAILABILITY

AVERAGE ASKING RATES

• Direct Lease: $1.42 NNN, down $0.08 YoY (-5%) and $0.23 (-14%) from the 2023 peak, but still +28% from 2021 levels.
• Trend: Rates decline for the eighth consecutive quarter, with landlords adjusting pricing to match tenant demand.

SOUTHERN CALIFORNIA INDUSTRIAL DIRECT LEASE AVAILABILITY

DIRECT LEASE TRANSACTIONS

• Volume: 374 deals (-5% YoY) totaling 25.6M SF (+24% YoY).
• Inland Empire: 6M SF leased (53% of total), 78% in 100K+ SF.
• LA County:1M SF leased across mixed-size buildings.
• OC: 0M SF
• Ventura: 43M SF
• Top IE Deals: Maersk (1.0M SF, Hesperia), IDC Logistics (844K SF, San Bernardino), DCG Fulfillment (772K SF, Redlands).
• Top LA/OC Deals: Breakthru Beverage (521K SF, Santa Fe Springs), Confidential Tenant (504K SF, Pomona), Nippon Express (421K SF, San Pedro).
• Owner Takeaway: Big-box logistics deals continue to dominate, especially in the IE. Class A, well-located assets outperform.

SUBLEASE MARKET

• Availability: 413 listings (-4% YoY), totaling 33.9M SF (-5% YoY, +869% since 2021).
• New Additions: 94 listings (-25% YoY), totaling 6.8M SF (-29% YoY).
• Rates: $1.41 NNN (+5% YoY).
• Transactions: 36 deals (-32% YoY), totaling 1.6M SF (-68% YoY).
• Trend: Sublease volume stabilizing at historically high levels; longer marketing timelines persist.
• Owner Takeaway: Expect sublease competition to remain elevated through early 2026. Position assets with turnkey readiness and clear value differentiation.

Sales Market

• For-Sale Supply: 1,634 listings (+20% YoY), 64.9M SF (+54% YoY).
• Sales Activity: 393 deals (+17% YoY), totaling 8.9M SF (+41% YoY).
• Pricing: $311/SF (-5% YoY, +26% since 2021).
• Regional Leaders: IE (4.0M SF, 44% of total), LA (3.1M SF), OC (1.5M SF), Ventura (0.3M SF).
• Owner Takeaway: Transaction velocity improves modestly, but higher financing costs keep pricing flat to slightly lower.

SOUTHERN CALIFORNIA INDUSTRIAL SALES: LISTINGS VS. VOLUME SOLD

CONSTRUCTION PIPELINE

• Under Construction: 1M SF (-47% YoY); IE accounts for 44% of total (6.2M SF).
• Deliveries: 6M SF completed in Q3 2025; 6.8M SF projected for Q4 2025.
• Trend: Developers remain cautious with speculative starts; Orange County is the only region with rising construction activity.
• Owner Takeaway: New deliveries will add short-term leasing pressure; owners should focus on tenant retention and building enhancements to remain competitive.

SOUTHERN CALIFORNIA INDUSTRIAL SALES: LISTINGS VS. VOLUME SOLD

STRATEGIC RECOMMENDATIONS FOR OWNERS

• Price Realistically: Continued softening warrants accurate pricing and quick adjustments to market shifts.
• Leverage Big-Box Demand: Target logistics tenants with large-scale requirements in the Inland Empire.
• Stay Competitive: Offer flexible terms and modernized build-outs to compete with new supply.
• Prepare for Q4 Surge: With 6.8M SF set to deliver, lock in tenants early to mitigate vacancy risk.
• Plan Ahead for 2026: Position assets to capture value as market fundamentals begin to stabilize.

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.