MARKET DRIVERS
The Los Angeles industrial market recorded notable leasing and sales activity in the first quarter of 2026, as lease rates and sale prices continued to stabilize. Recent global geopolitical developments have introduced volatility within the logistics sector, particularly across air and ocean freight, contributing to higher fuel costs, especially diesel, which are impacting user’s decision-making. At the same time, demand continues to accelerate among defense, aerospace, satellite, and advanced manufacturing users, who are actively expanding across key South Bay submarkets, including Long Beach, Torrance, El Segundo, Hawthorne, reinforcing the region’s role as a hub for innovation-driven industrial demand.
LEASING MARKET
Advanced manufacturing users continue to lead leasing activity across the market. Notable transactions include Neros leasing 265K SF of sublease space in Torrance Pacific Gateway and Varda Space Industries leasing 200K SF of the former Mattel Design Center. On the logistics side, Amazon leased 500K SF in Long Beach, Apex Logistics consolidated into 440K SF in Torrance, and Prologis leased 200K SF to NX Lifestyle Logistics. Landlords continue to hold firm on rates while offering concession packages, including tenant improvement allowances and free rent, to attract tenants. Demand for space under 50K SF has been less prevalent.
SALE MARKET
Owner-user acquisitions have re-emerged, signaling improved occupier confidence. Recent deals include the sale of an 83K SF building in Compton to Yuejie Freight, a 265K SF acquisition by Crenshaw Star from Link Logistics in Torrance, and a 100K SF purchase by Otoki America. On the investment side, EQT acquired the Frito-Lay facility via a sale-leaseback transaction.
NEAR-TERM OUTLOOK
With deliveries of Class A buildings slowing significantly, vacancy rates are expected to gradually improve. Financing, both conventional and SBA, is available and attractive. Elevated fuel costs are expected to continue pressuring logistics users in the near term, particularly those reliant on transportation-intensive operations. Meanwhile, continued growth in aerospace, defense, and advanced manufacturing sectors is expected to support leasing demand moving forward. Broader capital markets activity, including potential public offerings within the space and technology sectors, may signal future investor appetite and expansion.
1Q 2026 Los Angeles Industrial Market: Key Data Points
Explore our full Los Angeles industrial market review for deeper insights into leasing trends, sale activity, and submarket performance.
- Vacancy Rate Remains Tight: Direct vacancy edged up to 5.9% in 1Q 2026, remaining near long-term lows despite market headwinds.
- Asking Rents Stabilize: Direct average asking rents ended the quarter at $1.39/SF NNN, reflecting an 8.6% year-over-year decline as pricing adjusts to softer demand.
- Negative Net Absorption: The market posted -2.0M SF of direct net absorption, driven by tenant caution amid geopolitical volatility and higher transportation costs.
- Leasing Activity Slows: Total leasing volume reached 5.9M SF, down 38% year-over-year, with activity led by advanced manufacturing and logistics users.
- Construction Delivers Ease:
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