The industrial market in Inland Empire County has an 8.0% overall vacancy rate, because of softening demand driven by a surge in new supply.
MARKET DRIVERS
The Inland Empire industrial market was influenced by several key factors. New warehouse distribution buildings entering the market, outpacing demand and driving up vacancy rates. This has a substantial impact on the growth of the supply. Asking rents to have declined significantly because of the rising number of vacancies and the influx of lower-cost sublease options, as revenue dried up with weaker tenant interest.
Moderation played a part in e-commerce as marketplaces adjusted their supply chains after previous expansion. Automation technologies have the potential to transform the industrial landscape, reshaping the types of facilities and spaces that businesses need. As businesses face challenges and downsizing, there is now more sublease space available, providing tenants with greater flexibility and lower rental rates.
Despite short-term modifications to the market, the region’s strategic location near key transportation hubs and its population growth continues to bolster long-term demand.
NEAR-TERM OUTLOOK
In early 2025, the industrial real estate outlook for the Inland Empire remains uncertain due to trade disputes, global geopolitical concerns, and economic challenges like declining consumer spending and labor shortages. These factors are dampening demand for industrial space. While e-commerce still drives demand, its slower growth rate impacts the need for warehouse and distribution space.
Vacancy rates are expected to stay high as new construction outpaces demand, with increased landlord competition easing rental rates. Lease activity may rise as companies capitalize on lower rates and more space. The market has rebalanced in certain building sizes, with new leasing offsetting negative absorption.
Click here to subscribe to Kidder Mathews market research.