SoCal Rent Growth Stays Hot, But Caution Looms
Core Inland Empire submarkets like Ontario and Chino continue to see resilient rent growth and low vacancy, driven by strong demand for Class A space. However, a surprise U.S. jobs report from Friday revealed an unexpected decline in job growth, signaling a potential cooling of the broader economy that could impact future tenant demand.
The Inland Empire's industrial vacancy rate, which fell below 1% just a few years ago, has recalibrated to a range of 7.1% to 8.1%. This market normalization is also seen in Los Angeles County, where the industrial vacancy rate hit 4.9% in the first quarter of 2025, its highest level in a decade. A primary factor shaping the future market is a sharp decline in new construction, with development activity in the Inland Empire falling to its lowest point in 15 years. This slowdown is expected to create a "Supply Gap" by late 2026, as speculative construction starts have plummeted by over 50%, setting the stage for inventory to tighten once again. For now, tenants have gained leverage, evidenced by the more than 34 million square feet of industrial space available for sublease across Southern California. Landlords are actively offering concessions, including improvement allowances and rent-free periods, to secure deals, particularly for mid-size and large-block spaces in mid-aged buildings. The Inland Empire market is not uniform; the West IE, including Ontario and Chino, maintains a tighter vacancy rate around 6.0% with higher rents. In contrast, the East IE has more availability, with vacancy closer to 9.0%, offering more negotiable terms for tenants. Demand from e-commerce operators and third-party logistics (3PL) providers remains a key driver, with e-commerce companies projected to account for nearly 25% of all new leasing in 2026. The need for power-ready facilities capable of supporting automation has become a top-three factor in tenant location selection. Looking ahead, Prologis research forecasts the start
