Industrial market watchers are entering 2026 with renewed optimism. Despite continued economic uncertainty, a number of factors are fueling that optimism, led by sustained demand for modern logistics, e-commerce, and manufacturing facilities. In their 2026 national Industrial Outlook, CBRE predicts that industrial leasing activity will rise slightly in 2026, with tenants renewing at record levels. A decrease in speculative construction of industrial facilities will stabilize vacancy rates, and landlords with older industrial space will offer more incentives for early lease renewals.
CBRE forecasts a 5% year-over-year increase in industrial leasing activity, with lease renewals accounting for more than 35% of total volume, well-above the historical average of 24%. Much of the new leasing will be driven by a flight to quality, including much of the spec space built during the post-COVID building boom. Rent growth will remain subdued, however, as the industrial sector adjusts to shifting trade policies and slower economic growth.
Cushman & Wakefield’s U.S. Industrial MarketBeat for Q4 2025 states that, despite trade uncertainty, tenant demand strengthened in the second half of the year, with the national industrial vacancy rate holding steady at 7.1%.
Southern California
The Southern California industrial market showed some encouraging signs in the fourth quarter, with positive absorption in all but one of the five markets (Los Angeles, San Diego, Orange County, Mid Counties, and the Inland Empire) we track. Los Angeles was the outlier for the quarter, but still saw its vacancy rate remain relatively flat, decreasing by 2% from Q4 2024.
There was also some encouraging news from the ports, including the Port of Long Beach, which reported its busiest year in its 115-year history in 2025. Long Beach processed 9.9 million twenty-foot equivalent units (TEUs) in 2025, according to SupplyChainBrain, and expects to handle 9 million TEUs in 2026. The Port of Los Angeles also had a good year, moving roughly 9.5 million TEUs in calendar 2025, up about 2% versus 2024 and well above pre-pandemic 2019 levels.
Voit recently released our Q4 2025 industrial market reports for Southern California markets. While the data show that vacancy rates are virtually flat or up year over year (YOY) across all five markets, there are positive signs in some markets and submarkets. Here are some highlights of the individual reports.
Los Angeles
The total vacancy rate in Los Angeles County remained essentially flat year over year at 5.58%. While this is higher than the historic lows of the post-pandemic boom, it remains tight by historical standards. Average asking lease rates also remained flat at $1.43, but reflect a significant correction from the market peak of $1.88 PSF reached in Q2 2023, a total decrease of nearly 24%. Sale and lease transactions decreased 30% year over year, but 2026 holds promise.
Despite finishing with decreased leasing and sales activity, SVP/Partner Dan Berkenfield of the Irvine office says he is “cautiously optimistic” heading into the new year. “We have observed improved interest and activity from owner/user buyers taking advantage of lower and decreasing interest rates, as well as lower sale pricing offered by many sellers who are finally coming to terms with the current market conditions,” he writes in his market analysis. “Overall, we expect better leasing and sales activity, and a decreasing vacancy rate with less under-construction product scheduled to be delivered in 2026.”
Construction activity dropped sharply to 1.7 MSF currently under construction from a peak of over 7.1 MSF in mid-2023. We anticipate vacancy will compress in Q1, a direct consequence of a development pipeline that has essentially evaporated. This complete lack of new supply creates a pressure cooker for tenants, leaving them with limited options as demand increases.
San Diego
Landlords took an aggressive approach to attracting tenants in 2025 by lowering rental rates and increasing concessions, resulting in over 630,000 SF of positive absorption for Q4. Despite the surge in leasing, the vacancy rate in San Diego County increased by 70 basis points year over year to 7.16%. New construction, mainly speculative, has contributed to the elevated vacancy levels. Of the total space completed since the start of 2023, 49% remains available, while 44% of the 2 MSF under construction at the end of last year is still available. Average asking lease rates have also dropped slightly (less than 5%) year over year to $1.41.
In his market analysis, Senior Associate Connor Usselman of the San Diego office says that landlords have responded to market conditions by prioritizing tenant retention. “Many are operating with the mindset that it is better to make a deal than to hold out for optimal terms and risk extended vacancy in a down market,” he writes. “With fewer active tenants, spaces are sitting vacant for longer periods. In prior years, when vacancy was low, landlords held the upper hand in negotiations and could afford a ‘take it or leave it’ stance. Today, the dynamic has shifted, and landlords are often more willing to accept deals without pressing for higher rates or reduced concessions.”
Inland Empire
Like San Diego, the Inland Empire saw a significant surge in Q4 occupier expansion (nearly 1.9 MSF of net absorption), but the vacancy rate still increased by 113 bps year over year, from 7.69% to 8.82%. Also similar to San Diego, landlords are relying on concessions to fuel leasing activity. Available space was 12.11% of the market’s inventory at the end of Q4, up a full percentage point from Q4 2024. Sublease availability remains a significant factor in the market, with 17.8 MSF of sublet space available at the end of Q4. This total was less than 3 MSF as recently as Q2 2022. Rental rates remain stifled by competition from the influx of recently delivered product and a surplus of sublease availability, with the average asking lease rates dropping by nearly 11% from Q4 2024’s $1.12 to $1.00.
The Inland Empire saw multiple sales of $120 million-plus sales, led by the $174 million off-market acquisition of the 1.1 MSF Class A multi-tenant distribution facility in Fontana. Bridge Logistics Properties (BLP) purchased the asset from Hines and was represented by the Voit Anaheim-Ontario brokerage team, led by Executive Vice Presidents Michael Hefner, SIOR, and Juan Guiterrez, SIOR, and Senior Vice President Shy Assar.
In his market analysis, SVP/Partner Ryan Lal, SIOR, in the Ontario office, notes that “the IE market now finds itself in a period of longer lease-up timeframes, increased leasing concessions, and greater tenant leverage in negotiations.” With the change in market dynamics (available space has increased to 80 MSF as opposed to the 20 MSF at the close of 2021), “landlords are now conceding significant amounts of free rent and rental rates have come down from their all-time highs. This shift has been driven by both supply-side pressure from new construction and lighter occupier demand due to inflation, tariffs, and other factors.”
Orange County
Although vacancy remains near the highest level of the past decade, the Orange County industrial market is still historically low at 5.63% (up 54 bps from Q4 2024). There are early signs of recovery, with gross absorption rising 61% year over year. Tours and active requirements picked up in the second half of the year, creating optimism for 2026. The average asking rents in Q4 averaged $1.49 PSF, about 6% lower than the $1.59 recorded in Q4 2024.
Sale prices for Southern California industrial assets are typically among the highest in the nation, and Orange County led all SoCal markets at $406.52 PSF, up slightly from Q4 last year. Lincoln Property and Artemis acquired the 247,000 SF warehouse in Orange from Paper Mart in a sale-leaseback deal for $70 million in November, in the quarter’s largest sale. Despite the elevated vacancy rate, investor interest in the market remains strong.
“This discrepancy shows a growing reality that as lease rates have adjusted, capital sources are restructuring their investment criteria,” writes Senior Associate Reed Rutter of the Irvine office. “Investors understand Orange County’s structural constraints, limited land and static inventory base, coupled with historically strong demand, and they are positioning themselves accordingly.”
Mid Counties
While the broader Los Angeles region continued to see negative net absorption, Mid Counties showed notable resilience due to a limited development pipeline. Mid Counties recorded a 5.95% vacancy rate at the close of 2025. But the availability rate of 9.14% (up slightly from Q4 of 2024) paints a different picture, with substantial sublease space on the market. Asking rents have declined from $1.50 to $1.33 year over year. Landlords are using concession packages to secure creditworthy tenants, prioritizing operational efficiency.
Due to these factors, tenants remain in a much stronger negotiating position than during the supply-constrained periods of previous years. With a limited development pipeline and a growing surplus of secondary options, the submarket is entering a stabilized phase in which leverage has shifted away from landlords.
For a deeper dive into the individual markets, visit the Voit Market Reports page. To learn more about how we can assist you with your commercial real estate needs, contact one of Voit Real Estate Services’ trusted commercial real estate advisors.