Inland Empire Industrial Market Report – Q1 2025

The Inland Empire industrial market delivered strong performance in Q1 2025, showing clear signs of a regional rebound. Net absorption hit 4.8 million square feet, led by Inland Empire West, which accounted for more than 3.1 million square feet of activity. Vacancy fell 50 basis points to 6.3%, the first quarterly drop in nearly three years, while average asking lease rates continued to correct from pandemic-era highs.

Vacancy Trends
The Inland Empire West submarket saw a sharp decline in vacancy, dropping to 4.4%, its lowest since early 2023. In contrast, Inland Empire East held relatively flat at 8.5%. Sublease availability declined for the fourth straight quarter, with total vacant sublease space now at 15 million SF. Notably, large vacant blocks over 200,000 SF fell slightly to 65 buildings.

Leasing & Absorption
Leasing activity in Q1 2025 surpassed 14 million square feet for the third time in history. The 100,000–249,999 SF range led demand, capturing nearly half of all signed leases. Inland Empire West absorbed 6.8 million square feet—its strongest quarterly performance ever—while the East posted 5.5 million SF. This marked the first time in two years that the East surpassed 1 million SF in quarterly absorption.

Rental Rates
The average asking rent dropped for the seventh consecutive quarter to $1.10 NNN PSF, down $0.05 quarter-over-quarter and $0.30 year-over-year. Inland Empire West averaged $1.18, while East rates declined to $1.03. Despite the downward trend, rates remain roughly 50% above pre-pandemic levels.

Construction & Development
Active construction dipped below 11 million SF for the first time in over a decade. Just 10.8M SF is under development, with 9.3M SF expected to deliver in the next six months. Major projects include build-to-suits for Walmart and McLane in Ontario. Developers remain cautious, but over the last five years, the region has delivered 108.8M SF of warehouse/distribution space, reaffirming its status as a national logistics hub.

Labor Market & Employment
Labor market data reflects mixed conditions. Over the past 12 months, construction and manufacturing lost 5,000 and 3,200 jobs respectively, while transportation, trade, and utilities gained 2,700 jobs. The unemployment rate sits at 5.1%, slightly higher than the U.S. average but down from earlier months.

Investment Trends
Investment momentum slowed in Q1 as buyers took a wait-and-see approach amid higher interest rates and tariff concerns. However, long-term outlook remains strong. The Inland Empire continues to attract investor interest with some of the nation’s highest industrial rents, low development land supply, and strong absorption patterns.

Sales Activity
User sales volume hit $423.7 million in Q1, across 1.1 million SF. Top transactions included:
– 21600 Cactus Ave, Riverside: 889,445 SF for $257.1M ($289/SF)
– 1932 Bon View Ave, Ontario: 174,494 SF for $55.2M ($316.50/SF)
– 13203 Marlay Ave, Fontana: 60,800 SF for $16.2M ($265.60/SF)

Major Developments
Key projects under construction include:
– Speedway Commerce Center, Bldg 1 (West): 1.29M SF
– World Logistics Center (East): 1.0M SF
– The Hub, Bldg 2 (West): 926,100 SF
– Loma Creek Logistics Center (West): 534,234 SF

Market Outlook for 2025
The Inland Empire has clearly turned a corner. With vacancy rates declining, leasing activity surging, and construction tightening, fundamentals are stabilizing. Although investment remains cautious and lease rates are adjusting, the long-term outlook is positive. Expect a measured rebound through 2025 as users continue to seek out affordable space in the West’s premier logistics corridor.

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