Inland Empire Industrial Market Report – Q1 2025

The Inland Empire industrial real estate market displayed mixed signals in Q1 2025, with a slight vacancy drop to 7.4%, down 20 basis points from the previous quarter. Net absorption rebounded to 3.6 million square feet (msf), led by robust demand in the 200,000–500,000 SF range. IE West posted the highest absorption at 3.7 msf.

However, rental rates continued their descent, declining 28.7% year-over-year from their 2023 peak of $1.57/SF to $1.12/SF in Q1 2025. Landlords, facing tenant selectivity and growing sublease availability, have increasingly offered concessions such as rent abatements and teaser rates.

Leasing activity picked up with 98 new deals totaling 12.4 msf, showing resilience amid policy uncertainty. Mid-size buildings (100K–500K SF) dominated, accounting for nearly 60% of leasing volume, with strong interest in flexible spaces and smaller footprints.

Construction activity remains muted, with only 1.2 msf of new deliveries this quarter. The development pipeline has shrunk to 13.6 msf—down sharply from a 42.7 msf peak in Q3 2022. Fewer new starts could stabilize vacancy rates going forward.

Sublease availabilities held steady at 17.6 msf, comprising 12.7% of total space. While demand appears to be leveling off, broader uncertainty around tariffs, inflation, and borrowing costs may weigh on expansion plans.

Notable lease deals include Komar Distribution (855,000 SF, IE East), SML Warehouse (823,800 SF, IE West), and Samsung Electronics (800,526 SF, IE West). On the investment side, Burlington Coat Factory closed a $257M acquisition in Riverside, and U.S. Merchants secured a major asset in Ontario for $55M.

Outlook: As construction activity dips and leasing stabilizes, rental pricing may flatten in the near term. However, with over 193 projects in the pipeline (33 under construction, 160 proposed), future development may resume if demand conditions improve.