Industrial Market Looseness vs. Long-Term Demand: L.A.’s Balancing Act

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Industrial real estate in Los Angeles is seeing rising vacancies, but long-term demand remains

Los Angeles remains one of the country’s most pivotal industrial real estate markets, anchored by its massive logistics infrastructure and proximity to major ports. Recent months have brought a sharper sense of looseness to the industrial landscape, evidenced by rising vacancies and cooling rental growth. Yet, even as short-term metrics soften, structural demand drivers persist for the long run.

Rising Vacancy and Short-Term Looseness

After years of record-low availability, Los Angeles industrial vacancy rates have climbed noticeably in 2025. The overall vacancy rate reached 6.0% in the second quarter, up from under 1% just a few years ago (Source: CoStar) . This is the ninth straight quarter with an increase in vacancies, driven by tenant move-outs and new construction that remains unleased. Several factors are acting in combination:

  • Sublease availability rose to 10.7 million square feet, as some tenants released excess space back onto the market.

  • Net absorption stayed negative, reflecting more space vacated than leased, contributing to pressure on landlords.

  • Rent growth stalled and effective rents even fell, with concessions such as several months of free rent becoming common.

  • Strong rent growth from 2020 to 2023—nearly doubling—has given way to a correction, with average asking rents now down as much as 31% from their peak, settling around $1.35–$1.44 per square foot triple net in Q2 2025.

Demand Drivers Remain Strong

Despite the near-term slack, long-term demand for well-located industrial real estate in Los Angeles remains underpinned by several factors:

  • Port Proximity: The Ports of Los Angeles and Long Beach, the nation’s busiest, create ongoing demand for logistics and last-mile facilities throughout the region.

  • E-Commerce Expansion: Although growth has normalized, robust e-commerce continues to require vast warehousing and order fulfillment space.

  • Supply Chain Shifts: Reshoring and redundancy strategies—implemented after recent global disruptions—lead to higher inventory levels and more warehousing, not less.

  • Limited Land Supply: Land constraints in the market’s urban core offer insulation against oversupply in the long run, supporting long-term asset values.

Investor and Occupier Strategies

In this environment, both landlords and tenants are recalibrating their approaches:

  • Landlords/Investors are encouraged to accept greater flexibility, both on rent and lease structure, to maintain occupancy and cash flow. Strategic investments in property upgrades or repositioning can help attract quality tenants.

  • Occupiers face a rare window of improved negotiating power, with more choices and incentives available for those seeking to expand or relocate.

  • Developers should proceed cautiously: while long-term demand is buoyant, the market is working through a glut of recent deliveries, and the risk of overbuilding has increased.

Looking for warehouses for lease of warehouses for sale in Los Angeles? Contact Commercial Brokers International today at info@cbicommercial.com or 310-943-8530

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