Inland Empire Warehouse Q1 2025 Market Report

Vacancy Rates Decline Again as Leasing Demand Holds Steady

The Inland Empire industrial real estate market continued its steady path toward recovery in Q1 2025, with vacancy rates decreasing for the second consecutive quarter. The overall vacancy rate declined by 20 basis points to 8.5%, though it still sits 50 basis points above where it was a year ago. This drop was fueled by 3.4 million square feet (msf) of net absorption, largely concentrated in the 200,000 to 500,000 SF building segment.

Market Performance by Submarket

The Inland Empire West submarket recorded the highest quarterly absorption at 3.7 msf, while the East trailed slightly at 1.1 msf. Deliveries were limited, with just 1.6 msf brought to market—down significantly from the 6.0 msf delivered in Q4 2024. These low levels of new construction activity have placed downward pressure on vacancy.

Top Leasing Transactions in the Inland Empire East

IE East dominated leasing headlines with major transactions signed in Perris and Ontario. Highlights include:

• Komar Distribution Services leasing 855,000 SF at 3690 Webster Ave.
• SML Warehouse leasing 823,800 SF at 5691 E Philadelphia St.
• Samsung Electronics renewing 800,526 SF at 5750 Francis St.
• LC Logistics signing 558,000 SF at 12300 Riverside Dr.
• GEODIS renewing 593,563 SF at 27334 San Bernardino Ave.

Overall, leasing volume in the West remained approximately 1.3 times higher than in the East, supported by strong demand from 3PLs.

Rental Rate Trends

Rents continued to correct for the seventh straight quarter, falling 1.6% quarter-over-quarter and 8.1% year-over-year. The Q1 average asking rate across the region fell to $1.17 PSF/month, down from $1.41 a year ago. Despite the softening, rates remain 40% higher than pre-COVID levels. IE West continues to command the highest asking rents at $1.29, compared to $1.11 in the East and just $0.80 in the High Desert.

Construction and Deliveries

New construction remains at historic lows. Only 1.6 msf of new deliveries were completed this quarter. Total under construction dropped by 12.5 msf year-over-year to 6.2 msf. This pullback is expected to tighten the supply pipeline, setting the stage for greater pricing stability in the coming quarters.

Top Sales Activity

Notable Q1 2025 industrial property sales included:

• U.S. Merchants purchasing 174,500 SF in IE West for $55.2M ($316/SF)
• Edison International acquiring 140,000 SF in IE East for $23.9M ($170/SF)
• Dimensional buying 60,800 SF in Fontana for $16.2M ($265/SF)
• Bay City Electric Works purchasing 29,250 SF in IE West for $10.7M ($365/SF)
• Mikasa USA Inc. acquiring 29,848 SF in IE East for $9.1M ($305/SF)

Market Outlook

• Vacancy Rates are expected to continue decreasing as fewer construction completions enter the market.
• Asking Rents will likely stabilize or soften slightly as landlords compete for tenants amid high availability.
• Leasing Activity is expected to remain active through 2025, particularly in logistics and 3PL sectors.
• Tenant Strategy may lean toward short-term leases as uncertainty around trade and tariffs persists.

Conclusion

The Inland Empire remains one of the most active and resilient industrial markets in the nation. With strong absorption, limited new supply, and rent corrections underway, the region is well positioned for continued improvement throughout 2025.

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