Q1 2025 Los Angeles Warehouse Market Report

The Los Angeles industrial real estate market demonstrated continued resilience and positive momentum following the disruptions caused by the early 2025 wildfires. While these natural events tested community infrastructure and strained supply chains, the market rebounded with positive net absorption in the first quarter of the year. Now, the region faces new macroeconomic headwinds, including the proposed closure of the ‘de minimis’ exemption on imports and growing uncertainty around tariffs. Despite these challenges, pockets of strength continue to emerge in key submarkets.

Net absorption remained positive in Q1 2025, supported by significant move-ins across the region. The largest single transaction was Trader Joe’s taking occupancy of their new 1 million square foot build-to-suit distribution facility in Palmdale. This move not only anchors the city’s growing industrial footprint but also created over 1,000 jobs, signaling expansion in commuter-based logistics. Meanwhile, San Gabriel Valley (SGV) continues to lead absorption and leasing activity. US Elogistics took early occupancy of 694,000 square feet, with third-party logistics providers and consumer goods users collectively driving over 1.1 million square feet of net absorption in SGV.

Conversely, the South Bay submarket saw the most notable move-outs, including National Road Logistics vacating 443,000 square feet. Logistics user consolidation led to nearly 990,000 square feet of negative net absorption in South Bay, nearly offsetting SGV’s gains. Nonetheless, total leasing activity reached 8.6 million square feet—marking the highest quarterly volume in three years. SGV led all submarkets with 27% of leasing volume, favored for its affordable rates, skilled labor pool, and strategic B2B infrastructure.

Additional growth was recorded in the Central and Mid-Counties areas, particularly among construction and food and beverage users. Aerospace and defense technology clusters continue to form in South Bay, reinforcing sector-specific resilience. However, rising vacancy remains a pressing issue. Approximately 1.5 million square feet of speculative construction delivered without tenants, bringing total vacancy up to 6.4%—or 50.2 million square feet—compared to a record low of 1.4% in 2022. In response, asking rents have declined 12% year-over-year, now averaging $1.41 per square foot NNN.

The outlook for infill markets appears increasingly favorable. Construction activity has likely peaked in these high-demand areas, with 43% of active development now concentrated in Greater San Fernando Valley—well above the historical average of 16% from 2000 to 2020. Developers have largely paused new groundbreakings, awaiting improved conditions before underwriting new projects.

In summary, despite ongoing policy and economic uncertainty, the Los Angeles industrial market remains on a path toward equilibrium. Leasing activity is being driven by discounted rents and renewed demand for large blocks of space. As vacancy begins to stabilize and tenant demand realigns with supply, the market is poised for balanced, long-term growth.

Key Highlights:
• The industrial market remained strong in Q1 2025 despite macroeconomic headwinds.
• SGV led in leasing and absorption, while South Bay experienced notable move-outs.
• Vacancy rose to 6.4%, with 1.5 million s.f. of spec space delivered vacant.
• Asking rents fell 12% year-over-year, now averaging $1.41 NNN.
• Greater SFV now leads the region in active development, signaling future infill stability.