Southern California CRE Industrial Market Update – Q4 2025

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 Q4 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 adjustment phase following several years of extraordinary demand and development activity. Inventory levels remain elevated compared with earlier cycles as supply added during the pandemic logistics expansion continues to move through the market.

Direct lease availability has increased significantly since 2021, while tenant demand has become more selective and lease-up periods have lengthened. Asking rates continue to moderate from peak levels reached in 2023, and developers are slowing new construction starts while the market works through existing supply.

Despite the current correction cycle, long-term industrial fundamentals across Los Angeles, Orange County, Ventura County, and the Inland Empire remain strong due to the region’s proximity to ports, major transportation corridors, and one of the largest consumer markets in the United States.

Direct Lease Availability

• Existing Listings: 2,218 listings over 10K SF across the region — up significantly from prior cycles.
• Square Footage: Approximately 144.7M SF of direct lease availability across Southern California.
• Newly Added Listings: 508 new listings totaling 30.9M SF added during the quarter.
• Trend: Industrial availability remains elevated as new supply added over the past several years continues to exceed tenant absorption. Although new listings have slowed compared with peak levels seen earlier in the cycle, the total inventory level remains substantially higher than it was prior to 2021.
• Owner Takeaway: Owners should expect longer marketing periods and focus on competitive pricing, tenant improvements, and lease flexibility to attract tenants in a more balanced leasing environment.

SOUTHERN CALIFORNIA INDUSTRIAL DIRECT LEASE AVAILABILITY

AVERAGE ASKING RATES

• Direct Lease: $1.41 NNN average asking rate across the region.
• Year-over-Year Change: Rates have declined from peak levels reached in 2023 but remain well above pre-2021 levels.
• Trend: Asking rates have now moderated for multiple consecutive quarters as landlords respond to higher availability levels and slower tenant absorption. Despite the recent softening, overall pricing remains significantly higher than historical averages due to the rapid rent growth experienced during the pandemic logistics expansion. Rate reductions remain concentrated in Los Angeles County, where inventory levels are highest and landlord competition is strongest.
• Owner Takeaway: Owners should monitor competing listings closely and adjust pricing proactively to remain competitive while preserving asset value.

SOUTHERN CALIFORNIA INDUSTRIAL AVERAGE ASKING RATES: DIRECT LEASE VS. SUBLEASE

DIRECT LEASE TRANSACTIONS

• Volume: 366 direct lease transactions completed during the quarter.
• Total Square Footage: Approximately 9M SF leased across Southern California.

Regional Distribution

• Inland Empire: 13.3M SF (largest share of activity)
• Los Angeles County: 9.4M SF
• Orange County: 1.7M SF
• Ventura County: 0.5M SF

• Trend: Large logistics facilities continue to drive leasing demand, particularly in the Inland Empire where land availability supports large-format distribution buildings. The Inland Empire accounted for more than half of total leasing activity, with a large share of transactions occurring in facilities larger than 100,000 SF.
• Owner Takeaway: Modern logistics buildings with efficient loading configurations and strong freeway access remain best positioned to attract tenants.

SUBLEASE MARKET

• Availability: 398 sublease listings totaling 33.2M SF.
• New Additions: 91 new listings totaling 6.5M SF.
• Rates: Average sublease asking rates remain approximately $1.40 NNN.
• Transactions: 32 sublease transactions totaling 1.4M SF during the quarter.
• Trend: Sublease availability remains elevated compared with pre-pandemic levels but has begun to stabilize as tenants gradually absorb excess space created during the logistics expansion period.
• Owner Takeaway: Sublease inventory will likely remain a factor into 2026. Owners should emphasize building quality, location advantages, and operational efficiency to differentiate their properties.

Sales Market

• For-Sale Supply: 1,598 listings totaling 63.8M SF.
• Sales Activity: 402 transactions completed during the quarter.
• Volume Sold: 9.4M SF of industrial property sold.

Regional Leaders

• Inland Empire: 4.2M SF sold
• Los Angeles County: 3.3M SF
• Orange County: 1.6M SF
• Ventura County: 0.3M SF

• Trend: Investment activity has stabilized compared with last year as buyers adjust to higher interest rates and evolving market conditions.
• Owner Takeaway: Industrial assets remain a preferred investment class, but higher financing costs are moderating pricing and transaction velocity.

SOUTHERN CALIFORNIA INDUSTRIAL SALES: LISTINGS VS. VOLUME SOLD

CONSTRUCTION PIPELINE

• Under Construction: Approximately 12.8M SF currently under construction across Southern California.

Regional Distribution

• Inland Empire: 5.6M SF (44%)
• Los Angeles County: 3.4M SF
• Orange County: 2.3M SF
• Ventura County: 1.5M SF
  
  
• Deliveries: 4.1M SF completed during Q4 2025, with approximately 6.3M SF projected for early 2026.
• Trend: Developers remain cautious with speculative starts as higher inventory levels and slower leasing activity create additional risk.
• Owner Takeaway: Reduced construction activity may help restore supply-demand balance over the next several years, but near-term competition from recently delivered projects will continue to influence leasing conditions.

SOUTHERN CALIFORNIA INDUSTRIAL CONSTRUCTION

STRATEGIC RECOMMENDATIONS FOR OWNERS

• Price Realistically: Adjust pricing in response to increased competition and longer lease-up periods.
• Focus on Modern Logistics Features: Buildings with efficient loading, clear heights, and transportation access continue to outperform.
• Monitor Sublease Competition: Sublease space remains a meaningful component of overall availability.
• Plan for Stabilization: Reduced construction starts may gradually restore supply-demand balance as the market works through current inventory levels.
• Position Assets for the Next Cycle: Owners who maintain competitive properties and strong tenant relationships will be best positioned as fundamentals stabilize.

Connect with GM Properties

Understanding market conditions is essential when evaluating leasing strategy, asset performance, and long-term investment decisions. GM Properties provides property management, asset management, and brokerage services for commercial real estate owners throughout Southern California.

To learn how current market trends may impact your property or portfolio, contact GM Properties.