Industrial Transactions Slow as Sale Prices Slip from Record
By Kristen Smithberg | GlobeST | August 04, 2025
Industrial transactions in the United States totaled $27.6 billion during the first half of the year, with properties trading at an average of $130 per square foot, according to Yardi Matrix’s latest national industrial report. Although Southern California has seen strong recent demand, sale prices in the region—including the Inland Empire, Orange County and Los Angeles—have started to recede from record highs. The report notes that while tariffs and declining port traffic may continue to apply some downward pressure on sale prices in the coming years, further significant price reductions are not anticipated.
"Demand in the region may soften, but the ports will remain crucial to the nation’s commerce," Yardi Matrix stated.
Despite this robust economic activity, the national industrial vacancy rate climbed to a high-water mark in June, reaching 9%. This increase reflects normalized demand and slowing absorption following the delivery of more than two billion square feet of new space between 2020 and 2024. Many firms, particularly in logistics and retail, are choosing to optimize existing supply chains and delay leasing decisions amid ongoing uncertainty over tariffs.
Nevertheless, several long-term drivers continue to underpin the industrial sector. These include reshoring and nearshoring of manufacturing, the ongoing expansion of data centers, and a persistent shift toward e-commerce and omnichannel retail. Yet the pace of new supply may moderate in response to mounting challenges. In addition, new tax legislation could alter development dynamics: a reduction in tax credits for electric vehicles included in the One Big Beautiful Bill Act may affect the Battery Belt—an area stretching from Georgia to Michigan, home to numerous electric vehicle battery plants. The report cautions that it will take time for the full effects of the new tax law to be felt, but some projects may become financially untenable without the incentives.
Amid these changes, national in-place rent for industrial space averaged $8.60 per square foot in June—rising six cents from May and marking a 6.2% increase year-over-year. Coastal port markets and Sun Belt logistics hubs with significant population growth led the nation in rent growth. Miami saw rents rise 9.4% year-over-year, while Atlanta—a major Southeast hub for third-party logistics providers—recorded an 8.5% increase.
Industrial construction remains active, with more than 341 million square feet of space underway nationwide, representing 1.7% of total stock. Nearly 147 million square feet have already been completed this year. Yet developers in Southern California, in particular, face significant barriers to entry, including local opposition, land scarcity and stricter regulations that introduce new building standards and restrict truck routes, all of which could slow the pace of new construction, the report noted.
LA Industrial Vacancy Hits Record High as Demand is Negative
By Richard Berger | July 14, 2025 | GlobeST
The Los Angeles industrial market has returned to negative absorption. In Q2, the amount totaled -1.5 million square feet, according to a Savills market report.
Warehouse rents declined as vacancy increased by 50 basis points (bps) from the previous quarter to a historic high of 7%, representing a 130-basis-point increase compared to the 5.7% vacancy rate from a year earlier.
Savills said this was largely due to a growing inventory of available spaces under 200,000 square feet. With reduced occupier activity and increasing vacancy, overall asking rental rates decreased to $1.37 per square foot, marking a 0.7% decrease from the previous quarter and a 6.6% decline from the same time last year.
The report stated that these trends are likely to persist through the end of this year.
Despite inflationary pressure and historically high vacancy, Savills described the Los Angeles industrial market as resilient. Additionally, its proximity to the Port of Los Angeles and Long Beach, as well as limited new product pouring into the market, supports this long-term outlook.
“LA’s resiliency is being maintained by a mix of recovering trade (port volume rebounding), constrained supply since new construction has slowed, and the region’s critical role as a last-mile and import distribution hub as tenant demand continues to stabilize,” Savills’ Research Manager Caitlin Barrozo told GlobeSt.com.
Inland Empire Lacks New Construction
Meanwhile, shifting to the Inland Empire is where Barrozo said she found the most surprising trend.
“The Inland Empire has many different variables that influence industrial market conditions,” she said.
“The biggest hurdle is the lack of new construction, as there is approximately 6.9 MSF (million square feet) under construction. This is an 82.5% decrease from the 2023 peak of 39.2 MSF.
The limited developments, combined with the uncertain impact of tariffs and increasing vacancy rates, have caused occupiers to pause long-term commitments, she said.
“Market conditions will have minimal change until the dust settles on these variables,” according to Barrozo. “The Los Angeles industrial market mirrors these same conditions as the Inland Empire, but it is in a stronger position because construction has stayed marginally consistent, and it is near the Los Angeles/Long Beach ports.”
Savills reported that after two straight quarters of declining vacancy, the Inland Empire’s rate fell by 20 basis points (bps) in the second quarter to 8.7%, marking a 40-bps decrease from the same period last year. Second quarter absorption totaled -621,773 square feet (sf).
Renewals led the market’s leasing transactions in Q2 with four of the top 10 lease transactions. Burlington Coat Factory's renewal of its third location in the Inland Empire was the largest.
Asking rental rates in the Inland Empire have declined for eight consecutive quarters, signaling a broader market correction.
In Q2, they fell to $1.09 per square foot (psf) per month, representing a 6.7% decline from the prior quarter and a 10.5% drop year-over-year.
“Vacancy dictates asking rental rates; therefore, until vacancy stops increasing and reverts to a downward trend, declining rents will continue,” Barrozo said.
Warehouse Deal Activity Stalls as Economic Uncertainty Grows
By Kristen Smithberg | July 28, 2025 | GlobeST
Industrial deal volume was flat during the second quarter at $22.87 billion, a dramatic slowdown following two quarters of double-digit growth. The slowdown is likely due to caution amid rapidly shifting trade policy, an uncertain economic outlook and an abundance of available space, according to MSCI.
Warehouse operators have faced slower leasing activity during the past three years, as retailers, The Wall Street Journal noted, with manufacturers and other tenants taking a more cautious approach to new space following a period of expansion during the pandemic. A wave of new supply is exacerbating a supply overhang in the industrial sector, as more than 1.9 billion square feet of warehouse space has been delivered in the past four years.
The average warehouse vacancy rate increased to 7.1% during the second quarter, the first time it has exceeded 7% since 2014, according to Cushman & Wakefield data. What used to be a six-month lease-up time frame is now extending to a full year and even 18 months in some cases, according to the article.
The industrial pipeline has contracted more recently, with nearly 60 million square feet of new warehouse space completed in the second quarter, down 47% from last year. That represents the lowest level since the first quarter of 2019, JLL data shows.
Strong demand during the pandemic has pushed warehouse prices up from their 2019 level of $5.96 per square foot to $10.06 per square foot during the second quarter. But uncertainty around rent growth trends is causing warehouse investors to take a more cautious approach.
