Data Courtesy of CoStarâ„¢
Los Angeles' industrial market has shown signs of stabilization in recent quarters, but occupancy contracted. again in Q1, pushing vacancy higher and asking rents lower. After turning slightly positive in 2025, a notable improvement from the steep losses recorded in 2023 and 2024, occupancy fell by approximately 3 million SF in Q1. Combined with ongoing supply additions, this loss pushed vacancy up to 6.7% as of 2026Q2.
Tenant demand has softened amid higher interest rates, a slower pace of housing-related goods sales, local population loss, and a spattering of bankrupt brick-and-mortar retailers. Some newly delivered properties also remain available for lease. Vacancy increased most sharply in port-related submarkets such as Vernon, Commerce, and City of Industry, where logistics tenants vacated older and less efficient buildings. Volatility in imports and the potential for weaker consumer spending remain key risks, particularly as U.S. business inventories are already elevated. Inventory-to-sales ratios are near an all-time high in housing-related sectors, and additional bankruptcies among brick-and-mortar retailers facing rising transportation and import costs could further weigh on market conditions and prolong rent declines.
Despite these headwinds, leasing activity remains robust. More tenants are signing leases, driving new leasing volume recorded in Q1 before quarter-end to over 11 million SF, the second-highest total on record.
12 Mo Deliveries in SF
12 Mo Net Absorption in SF
Vacancy Rate
Market Asking Rent Growth
12 Mo Sale Volume
Demand for new space, however, remains limited. More than 40% of the 13 million SF completed since 2024 is still available, and most of the current construction pipeline remains uncommitted. The pipeline itself is modest, totaling roughly 3.2 million SF, and the ongoing removal of outdated buildings should help limit net supply growth. If U.S. retail spending performs as expected, vacancy rates are projected to begin declining in late 2026.
Asking rents have fallen by more than 20% from their peak, although the trailing year decline has moderated to less than 5%. Lease concessions remain common, with one to several months of free rent typically offered on larger transactions. Rents declined slightly in Q1 and are forecast to end 2026 marginally lower in the base case. With trailing year rent declines continuing to taper, rents appear to be approaching a trough in 2026. A notable compression in vacancy expected by 2027 could support the first annual increase in market rents since 2023.
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