2024 | Industrial Market Report | Southern California

2024 Southern California Industrial Market Report

Absorption was positive throughout 2024, with a total of 50 million square feet leased. Facilities under 1 million square feet made up the majority of leasing activity.
Rents have fallen in the Inland Empire, as a result of increased vacancy and new supply that remains available. Throughout the region, east side cities, like Rialto, are recording lower rents at $13.00 per square foot; meanwhile, western areas, like Ontario, are noting higher rent prices around $20.00.
New industrial construction has begun to slow from the previous high in 2022 to 2023 when more than 45 million square feet was delivered. In 2024, the metro recorded 9.2 million square feet in new construction. However, 13.3 million square feet remains on the way, with most ongoing developments targeting Ontario, Rancho Cucamonga, and Fontana.
The Inland Empire’s transaction activity continued to fall from its high of $10 billion in 2022. In 2024, the metro recorded around $3 billion in sales, which can be attributed to increased cap rates, declining rent growth, and the overall economy.

A decrease in occupancy has affected the metro, with an occupancy decline of 14 million square feet in 2024. The hardest-hit areas for occupancy were Vernon, Commerce, Santa Fe Springs/La Mirada, and Carson. Meanwhile, occupancy is lowest in flex buildings at 93.4%, and specialized industrial facilities noted the highest occupancy level at 96%.
Absorption levels declined for 11 consecutive quarters by year-end 2024. As a result of a slowdown in demand, rents for industrial spaces have begun to decline. Long Beach, a historically strong submarket for industrial activity, recorded rents dropping by about 20% to $19.38 per square foot.
Construction for industrial facilities has begun to decline from the cyclical peak of 8 million square feet, with 6.4 million square feet currently on the way. However, areas still recording construction are Long Beach, Santa Clarita, Antelope Valley, and Santa Fe Springs/La Mirada.
Industrial facilities in Los Angeles marked a decline in sales activity since 2022. However, institutional investors and REITs made waves in the market as they made up a large portion of sales in 2024.

Since the first half of 2023, San Diego’s industrial sector has recorded a decline in occupancy. However, small-bay warehouses lead San Diego in demand as more than half of 2024’s leases were for facilities under 100,000 square feet.
Rent in San Diego only grew by 0.3% in Q4 2024, but measured at 2.4% rent growth year-over-year. Owners have begun adjusting to rents that range from $15 to $22 per square foot, while also beginning to include concessions on new leases.
There is still 3.7 million square feet of industrial space on the way, which will continue the rent declines if absorption is unable to keep up. More than half of the ongoing construction will be delivered in Otay Mesa.
Sales dropped to around $2 billion in 2024, which is below historical norms. One of the largest sales in 2024 occurred in Otay Mesa, aligning with the demand for industrial space here. The trade was for a 115,000-square-foot property that sold for $23.45 million, or $203 per square foot.

Lease renewals and properties over 100,000 square feet make up the most activity in Orange County. These larger facilities accounted for more than half of 2024’s leases.
Rents have declined from peak levels, and are expected to keep slowing if absorption remains low. Several owners have begun offering concessions for their properties, but the metro is still one of the most expensive markets in the country with rents around $19.55 per square foot.
Around 1.8 million square feet was completed in 2024, with 2.1 million still on the way. However, 85% of this inventory has not been pre-leased, which could continue impacting vacancy and rent declines. All of the new inventory will be under 250,000 square feet, which is the average building size.
Orange County recorded $1.6 billion in transactions during 2024, which is on par with its sales activity from 2023. Trades were most common for properties under 200,000 square feet, and institutional investors and REITs took on the most sales.