The uncertainty created by the constantly evolving US trade policy continues to hinder industrial tenants from making long-term leasing decisions. This is especially true within some Southern California markets, which rely heavily on warehouse and logistics operations serving the Ports of Los Angeles and Long Beach.
Nationally, June container volumes at U.S. ports decreased 27% year over year, the steepest drop since COVID. After front-loading imports in April, shippers have pulled back, and July/August forecasts remain down 25%, signaling a decline in supply chain confidence. Closer to home, the Port of Los Angeles saw its streak of 10 consecutive months of container volume growth end in May, coming in 5% lower than May of 2024, and its lowest monthly cargo output in over two years. The Port of Long Beach also reported its first year-over-year decline in months, as volume fell 8.2%. Long Beach had seen a 23.6% increase in cargo volume in the first four months of 2025 compared to the same period in 2024. Although the increase was likely driven by businesses attempting to import goods ahead of potential tariff increases.
The effect of tariffs on industrial markets is being felt in other SoCal markets as well. In his assessment of the San Diego industrial market in the Voit Q2 2025 San Diego Industrial Market report, Michael Mossmer, SIOR, SVP/Partner writes, “Any remaining enthusiasm in the general economy has been squelched by current US trade policy. We find ourselves in a dire situation for business decision-makers, as a result of the Trump Administration’s tariff policies and additional economic sanctions that have either been imposed or threatened.”
There is some positive news for tenants, however. Asking lease rates are finally coming down after reaching record highs, and landlords are beefing up concession packages in most markets. Sean Sullivan, SIOR, Senior Vice President/Partner writes in his analysis of the Inland Empire market, “Tenants have finally seen a reprieve from rents that were rising out of control for several years.” It’s an observation that could be applied to most of the SoCal industrial space. There’s also encouraging news for investors and owner-occupiers, as pricing for industrial assets is coming down from record pricing levels —with Los Angeles, the Inland Empire, and Orange County commanding the highest prices per square foot (PSF) in the country.
Let’s look at the highlights of the individual SoCal markets from the Voit Q2 2025 Market Reports.
Orange County
The Orange County industrial market is undergoing a realignment period, as rising tariffs have disrupted supply chains and caused some occupiers to defer space needs until inventory and logistics stabilize. The vacancy rate increased by over 100 basis points year over year (YOY) — from 4.18% to 5.22%, a 25% jump — and availability rose from 6.92% to 7.78%. The vacancy numbers are unlikely to decrease in the near term, with 1.8 million square feet (MSF) of new product under construction and an additional 1.0 MSF in the planning stages.
Average asking lease rates continued their downward trend to $1.53 from $1.66 in Q2 2024. Sales pricing dipped slightly YOY to $371.93 in Q2 from $389.26 a year prior. Net absorption finally turned positive in Q2 2025 at 336,362 SF, following multiple quarters of negative absorption. This recent uptick suggests the market is starting to find its footing after a prolonged period of uneven activity. While it’s too early to call this a full recovery, the positive movement points to a more balanced environment ahead as companies continue to refine their space needs and long-term strategies.
The outlook for Orange County’s industrial market is set for a temperate path over the next six months, as trade policy uncertainties and broader economic signals continue to shape occupier strategies, creating hesitation for some. However, we are starting to see emerging optimism in segments such as defense technology and AI, with these users expecting short-term growth. Even so, Orange County’s fundamentals imply gradual stabilization rather than a sharp rebound.
San Diego
The vacancy rate in the San Diego industrial market has tripled over the past two and a half years, forcing some landlords to take a more aggressive approach in pursuing tenants with lower rental rates and increased concessions. The vacancy rate now stands at 7.45% (with an availability rate of 9.44%) compared to 5.69% in Q2 2024, and nearly four times what it was in Q2 2022 (1.92%). There was also 2.3 MSF of sublease space available at the end of Q2. Sublease availability has remained above 2 MSF for four consecutive quarters, compared with the 225,000 SF of sublease availability at the end of 2021.
Average asking lease rates are down slightly YOY at $1.43. The number of leasing transactions was marginally higher than the quarterly average from 2021 to 2024, but the square footage leased was below 1.5 MSF for only the second time in the past two years in Q2. This resulted in 764,932 SF of negative net absorption in Q2 – the tenth consecutive quarter of negative net absorption. The last time the San Diego market recorded two consecutive years of negative net absorption was 2008–2009. The dramatic increase in rental rates in recent years has pushed some tenants to make do with less space than they would prefer. The low levels of new construction (outside of Otay Mesa) and the decrease in occupied space in certain areas has given tenants in the market more options than they have had in years.
The combination of economic uncertainty and new supply in the market (1.4 MSF under construction) means tenants will continue to be conservative when making real estate decisions in the coming months — until there is more clarity in trade policy.
Los Angeles
The increase in vacancy in the Los Angeles industrial market has been far less dramatic than in the other SoCal markets, with an increase of less than 6% YOY to 5.57%, and overall demand remains steady. The decline in port activity has import-heavy users exercising caution in their long-range planning, and the unpredictable tariff policy changes have added new layers of uncertainty for manufacturers and logistics.
Many companies prioritize operational efficiency over rapid expansion, opting to renew, downsize, or delay larger commitments. Even tenants that remain active in the market are often targeting smaller, more flexible footprints rather than large-scale bulk space. Los Angeles posted negative net absorption of 644,869 SF in Q2 2025, a reversal from positive activity in Q1. For tenants, this is a chance to lock in quality space before competition heats up and rents start rising again. Overall, the market is moving toward a more active, confident cycle centered on strategic growth and positioning.
Lease rates decreased to $1.46 PSF from $1.57 a year ago, with the decline primarily due to rising inventory levels (over 1.0 MSF delivered YTD, and 2.0 MSF more under construction), providing tenants with more leverage. Sales volume remains robust, with over a billion ($1.16B) in transactions through June — the fourth-largest sales volume nationwide and the largest in the Western US.
Inland Empire
Vacancy in the Inland Empire continues its upward trend, finishing Q2 at 8.18%, a full percentage point higher than the level of a year ago. The increase in vacancy was partly driven by the steady stream of new supply coming into the market, with over 10 MSF delivered annually for the last decade (although only 3.6 MSF was delivered in the first half of 2025).
The decrease in port activity in Q2 also impacted the vacancy rate. A significant portion of the Inland Empire economy is driven by storing and distributing goods from China. The ports of Long Beach and Los Angeles saw a substantial reduction in cargo in Q2, with imports falling 13% and 9% respectively, at the midpoint of the quarter. Sublease availability continued to impact the market, exceeding 17 MSF in Q2 for the sixth consecutive quarter.
The average asking rate in Q2 of $1.03 was unchanged from the previous quarter, but down a substantial 21% from the level of a year ago. Even with the considerable reduction in asking rents, landlords are offering concessions to fuel leasing activity. Sales volume remains down as well, falling below $600 million in Q2 for only the fourth time since 2021, due in part to elevated interest rates and the supply/demand imbalance of the past two years.
For a more in-depth look at the individual markets, download one of Voit’s Q2 2025 Market Reports.
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