The Inland Empire industrial market experienced a slower start to 2026 but is showing signs of increased activity. Vacancy reached 7.7%, with availability at 12.7%, reflecting improvement compared to 4Q 2025. Tenants continue to hold negotiating leverage, and pricing and lease terms have yet to fully stabilize.
MARKET DRIVERS
The Inland Empire industrial market continues to recalibrate. Despite elevated inventory levels, gross leasing exceeded 48M SF, signaling sustained demand across the region.
Private buyers accounted for approximately 50% of sales activity, with knowledgeable investors operating selectively. Increased competition is driving both owners and tenants toward more efficient buildings, strengthening negotiating leverage for landlords with high-quality properties.
Ongoing geopolitical and regulatory uncertainties continue to influence market conditions, particularly within the supply chain sector, which remains sensitive to external disruptions.
FORWARD OUTLOOK
Market indicators suggest that lease rates will begin to stabilize in the latter half of 2026, extending into 2027, as available inventory is gradually absorbed. Development activity remains constrained, as many entitled projects have yet to break ground due to limited equity capital. As a result, developers are increasingly pursuing build-to-suit opportunities.
Stabilization is expected to favor Inland Empire West (IEW) over Inland Empire East (IEE), as absorption in the eastern submarket is likely to lag because of excess vacant inventory.
Vacancy rates are anticipated to decline for properties under 100,000 SF, while improved financing options are expected to attract owners and investors. Currently, few projects in this size are seeking city plan approval; however, development activity may increase in of the second half of 2026, as smaller projects typically encounter fewer approval hurdles.
1Q 2026 Inland Empire Industrial Market: Key Data Points
Explore our full Inland Empire industrial market review for deeper insights into leasing trends, sale activity, and submarket performance.
- Vacancy Rate Rises but Shows Signs of Stabilization: Direct vacancy reached 7.7% in 1Q 2026, up year-over-year, though availability improved compared to late 2025 as absorption trends begin to normalize.
- Asking Rents Continue to Reset: Average asking rents declined to $0.97 PSF (NNN), reflecting a 6.7% year-over-year decrease as pricing adjusts to elevated inventory levels.
- Net Absorption Turns Slightly Negative: The market recorded net absorption of -40,994 SF in 1Q 2026, signaling a pause in occupancy growth amid tenant caution.
- Leasing Demand Remains Active: Total leasing activity reached 7.5M SF during the quarter, highlighting continued occupier demand despite market recalibration.
- Development Pipeline Becomes More Selective: New deliveries totaled 1.6M SF, while ground-up speculative development remains constrained, pushing developers toward build-to-suit strategies.
Click here to subscribe to Kidder Mathews market research.