Inland Empire Industrial Market Trends – Q1 2025 Overview

Published by: InlandEmpireWarehouse.com

The Inland Empire industrial real estate market made a notable rebound in Q1 2025, with improving fundamentals, positive net absorption, and increased tenant interest despite lingering caution in lease negotiations and policy-driven uncertainty.

Vacancy and Leasing Trends  

Vacancy across the Inland Empire Core decreased to 6.6%, with a sharp drop to 4.7% in the West submarket due to strong leasing activity and no new construction deliveries. The East submarket saw vacancy edge up slightly, reflecting increased completions. Across the region, tenants favored short-term flexibility and continued to seek affordable space, particularly in logistics and distribution centers.

The average taking lease rate fell to $1.11 NNN per square foot per month, with the East averaging $0.98 and the West holding at $1.18. The IE Core maintained a competitive rate of $1.12. Although lease rates are down, demand remains steady, particularly in buildings sized between 100,000 and 249,000 SF, where most leasing activity occurred.

Net Absorption and Market Activity  

The Inland Empire reported 3.6 million SF of net positive absorption in Q1, driven by move-ins like Komar Distribution (855,330 SF in Perris) and Samsung America (800,526 SF in Ontario). Leasing demand totaled 11.7 million SF for the quarter, highlighting the market’s recovery trajectory.

Construction & Development  

Only 9.5 million SF remained under construction across the region, a 75% drop from peak development levels in 2022. With just 549,000 SF breaking ground this quarter, the pipeline is tightening. Construction deliveries totaled 2.7 million SF, including a 1 million SF build-to-suit for Lowe’s in Perris.

Sales and Investment Activity  

Investment sentiment remains cautious, but activity is gaining momentum. Q1 saw $423.7 million in user sales across 1.1 million SF—marking the strongest quarter since 2021. Institutional investors appear well-capitalized and ready to re-enter as market stability returns.

Employment and Labor Conditions  

Unemployment in the Inland Empire declined to 5.1% in February 2025, improving from 5.3% in January. However, employment in transportation, warehousing, and utilities dropped by 6,200 jobs, emphasizing the need for continued flexibility in labor planning and site selection.

Market Outlook – What’s Next for Inland Empire Industrial?  

Despite economic headwinds and policy uncertainty surrounding tariffs and trade, the Inland Empire’s industrial sector is positioned for growth. Tightening vacancy, stable leasing, and restrained development suggest that landlords may regain pricing power later in 2025. Sublease space remains elevated, but tenant demand continues to absorb availability gradually.

With rising interest in cost-effective warehousing and fulfillment solutions, the Inland Empire remains one of Southern California’s most attractive regions for logistics, e-commerce, and supply chain operations.

Looking for Warehouse Space in the Inland Empire?  

At InlandEmpireWarehouse.com, we help businesses of all sizes find and lease industrial space across the Inland Empire, including Riverside, Ontario, San Bernardino, and surrounding areas. Whether you’re looking for distribution space, cold storage, or flex use facilities, our team is ready to help you secure the right deal in today’s market.

Contact us today to explore leasing options and take advantage of current rates before conditions shift.