- Research & Insight -

 EQT Real Estate has made a major bet in the logistics sector, acquiring a 5.2 million square foot portfolio in Southern California, an area that's home to millions of residents.

Rexford Industrial, which was the seller of the 32 buildings, reported the transaction to be worth roughly $1.2 billion. The investment firm used its EQT Real Estate Industrial Value Fund VI to fund the purchase.

The portfolio can be broken down into two parts of SoCal. Most of the square footage (greater than 50 percent) spans across Los Angeles, Orange County, the South Bay and San Gabriel Valley. The remaining 46 percent is positioned in the Inland Empire West, which is near the Ontario International Airport.

These markets represent a big population opportunity; LA and the Inland Empire alone host about 17.7 million residents, with as many as 25 million people living within 250 miles of each region.

Plus, the fundamentals provide tailwinds. According to Matthew Brodnik, global chief investment officer at EQT Real Estate, Southern California's industrial sector as a whole benefits from limited supply.

Coastal infill regions have hosted occupancy rates that range between 93 percent and 94 percent, according to EQT. The portfolio is 96 percent leased to 36 tenants.

 "This acquisition reflects our ability to move quickly and decisively on a portfolio of this scale and complexity. With 36 tenants across a diverse set of industries, the assets provide a granular, well-established income base from day one, and we see clear opportunities to deepen those relationships as leases roll over," Gardner Ellner, EQT's managing director of investments at US Logistics, said in a statement. 

"We look forward to actively managing the portfolio, which features assets that are best positioned to capture the broadest and highest growth segments of tenant demand in Southern California."

The tenants at the properties are involved in a range of industries including consumer electronics, food and beverage, consumer goods, chemicals and plastics, automotive, aerospace and defense, HVAC and building products, logistics, as well as apparel and fashion. The weighted average lease term at the buildings comes out to 2.7 years.

This marks another move in the industrial sector for EQT. In July, it acquired a 2.8 million square foot logistics portfolio in six high-growth national markets.

Some other major acquisitions in 2026 include teaming up with Americold Realty Trust on a $1.3 billion cold storage joint venture of at least 12 assets and a purchase of a 25-warehouse portfolio in March for $575 million.

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. 

The industrial real estate recovery is beginning to split along building-size lines, with the largest logistics facilities pulling ahead of their smaller counterparts.

Vacancy has fallen by 196 basis points among buildings larger than 1 million square feet since peaking in the fourth quarter of 2024, according to a new report from Affinius Capital. Vacancy in properties between 500,000 and 1 million square feet has declined by 130 basis points.

Smaller warehouse categories have not experienced the same inflection. Vacancy in facilities between 100,000 and 500,000 square feet has continued to rise during the past two years and remains at cyclical highs.

Buildings larger than 1 million square feet are now the only major industrial size category with vacancy below its 20-year average, Affinius found.

The improving performance follows a sharp retreat in construction. The pipeline for facilities exceeding 1 million square feet fell from approximately 137 million square feet in the third quarter of 2022 to 43 million square feet in the second quarter of 2026, a decline of nearly 70%.

The slowdown is part of a broader pullback in industrial development. Construction starts totaled 53 million square feet in the first quarter in the entire sector, the lowest three-month level since 2014 and less than half the quarterly average from 2020 to 2023.

Higher interest rates, tighter construction financing, moderating rent growth and elevated vacancy have discouraged new projects. At the same time, warehouse construction costs remain approximately 48% above year-end 2020 levels, according to Bureau of Labor Statistics data cited by Affinius.

The supply reduction could help landlords regain pricing power as available bulk logistics space becomes scarcer. Affinius said the opportunity may extend to both acquisitions and development, although performance will vary considerably by market.

Affinius identified Louisville, Dallas-Fort Worth, Nashville, Phoenix, Philadelphia and Chicago as markets where substantially smaller development pipelines and favorable vacancy trends could position bulk logistics properties for stronger performance.

Phoenix stands out. Construction of million-square-foot facilities has fallen from a cyclical peak equal to 26.9% of existing inventory to 5%, while vacancy has dropped from 13.3% to 0.9%. Chicago's vacancy declined from a peak of 10.9% to 3%, while Louisville had virtually no vacancy or construction underway in the segment.

Demand is also evolving toward larger, more technologically sophisticated properties that can accommodate automation, higher clear heights, expanded trailer storage and complex distribution networks.

Power availability is becoming an additional differentiator. Automation, robotics, climate control, electric-vehicle charging and advanced material-handling systems are raising warehouses' electrical requirements, potentially making sites with adequate and expandable capacity more valuable and difficult to replicate.