Data Courtesy of CoStar™
Industrial vacancy in Los Angeles has increased in line with the national average over the past two years. However, while national vacancy expansion has been driven by supply growth, LA's has been driven by a contraction in occupancy, which has fallen below pre-pandemic levels. Net absorption ran negative for the 11th consecutive quarter at the close of 2024, and spec developments are delivering vacant. Vacancy has reached 5.9% as of the first quarter of 2025, up from an all-time low of 1.7% at the beginning of 2022.
Of the nearly 11 million SF of new industrial space completed since 2023, roughly 37% remains vacant. Meanwhile, trailing-year net absorption of SF was weighed down by downsizing logistics tenants, bankrupt retailers closing warehouses, and some manufacturers shutting down operations.
Vacancies have grown the most in areas tied to port activity, such as Vernon, Commerce, and City of Industry. Some logistics tenants continue to downsize heading into 2025, often vacating older, less functional buildings in their portfolio. Imports to Southern California's twin ports were below peak levels reached in 2021-22 until the summer of 2024.
12 Mo Deliveries in SF
12 Mo Net Absorption in SF
Vacancy Rate
12 Mo Rent Growth
12 Mo Sale Volume
However, rising import traffic, along with a stronger pace of U.S. consumer spending and at least slowly growing U.S. business inventory levels, indicate that occupancy loss could moderate and perhaps turn to expansion in 2025. Tenant demand appears to be turning the corner. In the second and third quarters of 2024, new leasing volume (excluding renewals), a leading indicator of future net absorption, exceeded 10 million SF for the first time since 2021.
A fair amount of the 5.4 million SF currently under construction, which is over 80% available, will likely deliver vacant. However, the ongoing demolition of obsolete buildings will limit net supply growth. Furthermore, a declining under-construction pipeline could lead to more moderate supply additions in 2025, potentially as tenant demand reaccelerates. Tenants are still vacating spaces at a heavy pace heading into 2025, but vacancy does not rise substantially higher in the forecast.
Asking rents in the market have declined by approximately 17% from 2023 peaks, marking the first downturn in over a decade. In addition, landlords are offering increased concessions such as free rent. One to several months of free rent are common among new larger leases. Owners may reduce asking rents further as vacancy elevates above historical averages. However, rents could rise again in 2025 as the minimal development on track to deliver a year from now signals the potential for market conditions to tighten again as demand improves.
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