- Research & Insight -

The Inland Empire is seeing relentless demand for high-clearance logistics space along the I-215 corridor, especially. That's exemplified by Southwest Traders' $40.5 million purchase of Gateway at Menifee, a 229,934-square-foot industrial facility at 33520 Zeiders Road that was sold by Scott Road Property, LLC, according to Colliers, which executed the deal.

The deal moved at an accelerated pace, with escrow opening in May 2026, and both parties executed a quick close, underscoring the strategic importance of the acquisition. Colliers Executive Vice President Rick Nunez of SIOR and Associate Mateo Mobilia represented the seller and Senior Client Services Specialist Michael Romero represented the buyer.

Under the rapid sale, the buyer needed to complete the required tenant improvements to be fully operational to service a large new national client contract, Nunez told GlobeSt.com.

"It's not very often that deals of this size transact this quickly," Nunez said. "Making things happen so quickly required the focus of both the buyer and seller, as well as assembling a great team to execute.

This included everyone from the title company, engineers, appraisers, environmental consultants, construction contractors and the lender.

"The building's location and features, including the large, secure yard, made it a great option," according to Nunez.

The asset in the sale is Building 3 within the five-building industrial complex, formerly known as Scott Road Commerce Center.

Terry Walsh, president of Southwest Traders, said in a release that the Menifee facility represents a critical next step in his firm's growth strategy, enabling it to scale its operations and expand its regional logistics footprint.

Walsh said he plans to invest approximately $25 million to retrofit a portion of the building into a refrigerated distribution center.

Meanwhile, the Inland Empire's industrial market in Q1 showed a combination of moderating capital-markets activity and gradually stabilizing fundamentals, with each of the major brokerage sources providing a slightly different lens on the quarter.

Avison Young reported that industrial investment volume reached $553.9 million across 48 transactions, noting that this level reflects a normalization of activity rather than a demand reset.

The firm emphasized that institutional capital began re-engaging as interest rates and inflation stabilized.

NAI Capital reported a lower total sales volume of $381.6 million, likely reflecting differences in tracked deal sizes and geographies and highlighted that falling vacancy and renewed leasing momentum supported buyer confidence even as pricing recalibrated.

Cushman & Wakefield stated that the region's vacancy rate reached 8.5 percent, driven largely by four move-outs exceeding one million square feet each, which produced negative 3.4 million square feet of net absorption during the quarter.

Savills reported a slightly higher 9.9 percent vacancy rate and negative absorption of 2.3 million square feet, reinforcing the narrative that large blocks of space returned to the market even as tenant demand remained active.

Inland Empire Industrial Rents Decline from Peak

Along with elevated availability, asking rents continued to decline from their peak, with Avison Young citing an average of $1.01 per square foot, down 35.7 percent from 2023, while NAI Capital reported 95 cents per square foot, a 7.8 percent year-over-year decrease.

Leasing activity strengthened meaningfully, with CBRE reporting 13.6 million square feet of new leasing, a 40 percent increase quarter‑over‑quarter, supported by major commitments from Medline, Tireco and Custom Goods.

This uptick in leasing helped narrow the pricing gap between buyers and sellers, thereby supporting transaction velocity. Avison Young also noted that Walmart's owner‑user acquisition in Riverside served as one of the quarter's anchor transactions, signaling that large corporate users remain willing to deploy capital for strategic facilities.

Taken together, these sources show that Q1 industrial sales in the Inland Empire were shaped by a recovering capital-markets environment, a temporary drag from large tenant move-outs and improving leasing fundamentals that helped stabilize investor sentiment.

Industrial investors may have to wait through another period of elevated vacancy, but the market could be approaching an inflection point by late 2027.

A new national forecast from CoStar projects that slowing construction and strengthening absorption will gradually reduce industrial availability after vacancies rise modestly into early 2027. That shift could allow rent growth to resume and accelerate as the market moves toward balance, according to Juan Arias, CoStar's national director of U.S. industrial analytics.

The outlook is not an immediate recovery story. New supply is still expected to exceed leasing demand in the near term, keeping vacancy in the mid-7% range. But the forecast suggests that the development pipeline will become far less of a drag by 2027 and early 2028, potentially improving the operating outlook for owners and investors.

The expected slowdown in construction is the most important factor behind the projected improvement.

Net deliveries are forecast to fall to just over 40 million square feet in early 2028, according to CoStar. That would mark a much smaller volume of new industrial space entering the market than the sector has absorbed in recent years.

Deliveries are expected to increase gradually after that, reaching roughly 56 million square feet in 2031. But the near-term pullback could give demand more room to work through the supply that has pushed vacancy higher across many markets.

The national industrial vacancy rate, now in the mid-7% range, is expected to increase slightly into early 2027 before declining gradually as supply and demand come back into balance.

CoStar projects that vacancy will reach equilibrium in late 2027 and fall to 7% by the end of 2030. That trajectory would represent a meaningful improvement for landlords, although it also underscores that the market is likely to remain tenant-friendly in the near term.

 For investors, the forecast reinforces the importance of distinguishing between current property performance and the longer-term supply outlook. Assets facing lease rollovers or near-term vacancy may still encounter pressure, while properties positioned to benefit from a tightening market later in the cycle could see a better environment for rent increases. 

Data center construction is creating a powerful, under‑the‑radar tailwind for warehouse landlords, as developers and operators scramble for space to store the massive volume of equipment and materials tied to hyperscale projects. For investors, the build‑out of AI‑driven data centers is increasingly showing up not just in land and power deals, but in industrial leasing, pricing and transaction volumes.

Data center development has become so intense that policymakers are starting to push back even as the construction machine keeps running. New York Gov. Kathy Hochul's latest executive order imposes what is reportedly the first statewide moratorium on new hyperscale data center construction and 14 other states are weighing similar measures, even though bans have already failed in at least six states.

The projects are largely being driven by AI‑related demand, and they now account for a distinct slice of the construction economy; when JLL recently warned of fast‑rising building costs, it said demand in the construction market had essentially split into two camps: data center work and everything else.

All of that activity comes with a basic logistical problem: these facilities require enormous amounts of specialized equipment and building materials that must be staged and stored somewhere. According to Bloomberg, that need is translating into spillover demand for warehousing and storage real estate near major data center clusters.

Data center tenants also need ongoing space for replacement parts and equipment to keep facilities running, extending demand beyond the construction phase.

JLL has projected that data center‑related tenants will sign leases for about four million square feet of warehouse space this year in the Mid‑Atlantic alone, including Northern Virginia's Data Center Alley, up from 2.8 million square feet last year. The firm estimates that figure could reach 14 million square feet by 2030, underscoring how quickly this niche is scaling.

 Other regions are seeing similar effects as data center and tech‑related projects take hold; around Columbus, Ohio alone, there are 138 data centers, helping to polish the Rust Belt's profile as a tech and manufacturing hub. 

 With so many data centers under construction, delays are common and those delays intensify the need to store materials and equipment, including inventories for suppliers feeding these projects. David Levine, Blackstone's head of Americas real estate, told Bloomberg that if you are building data centers or power generation, there are "massive amounts of equipment" that must be stored somewhere and that it is fair to assume every major data center user needs warehouse space. 

Blackstone's Link Logistics has seen about 15% of new leasing at its properties coming from data center‑related tenants, highlighting how quickly this segment has become meaningful for industrial owners.

JLL said more than 40% of new industrial leasing in the greater Washington, D.C. metro region in 2025 came from data center‑related tenants, up from 13% in 2024. Purchases of industrial properties in that market reached about $1 billion last year for deals larger than $25 million, roughly triple the 2024 volume and prices per square foot were up 39%.

For investors, that combination of rising data center demand, tightening warehouse supply and higher pricing points suggests a distinct capital flows story anchored in these tech and power infrastructure projects.

Industry executives say data center users are reshaping the competitive landscape for warehouse space. Jeffrey Small, chief executive of industrial landlord MDH Partners, told Bloomberg that data center firms can pay much more than traditional third‑party logistics companies. For now, he added, there is still enough "hangover" space from industrial overbuilding in recent years to absorb their requirements.

The question for investors is how long that cushion lasts as more moratoriums are debated, more AI‑driven capacity is planned and more projects move from proposal to active construction.

If JLL's projections for Mid‑Atlantic leasing and warehouse demand tied to data centers prove out, the sector could remain a meaningful driver of industrial occupancy and pricing through the end of this decade. That dynamic may give landlords positioned near key data center corridors, power hubs and logistics routes an additional edge in attracting tenants that view warehouse space as mission‑critical infrastructure, not just a commodity cost.