The ports of Los Angeles and Long Beach, originally designed to offer protection from storms, have repeatedly faced trade policy uncertainties and fluctuations in recent years during President Donald Trump's second term. However, what initially appeared to be a burden has proven advantageous for the surrounding industrial market. From the announcement of the first comprehensive tariffs in April 2025 to the current war with Iran, massive and disruptive global trade flows have characterised the region. Surprisingly, the industrial real estate sector in port locations or near ports is benefiting from this turbulent environment.
After a boom-and-bust cycle that dominated recent years and drove the vacancy rate for warehouse space to a high of 7 per cent this year, the industrial market in Los Angeles now appears to be on the verge of an upswing. Gregg Healy, Executive Vice President and Head of Savills Industrial Services, describes the situation by stating that 'chaos is the new cocaine' and expects turbulent times to continue.
Rising shipping volumes and robust demand
Shipping volumes at the ports of Los Angeles and Long Beach have increased by 1.8 per cent this year. After the Port of Los Angeles surpassed the 1 million container unit mark in June 2026, this figure was almost reached again in July, making it the second busiest July on record. Gene Seroka, Executive Director of the Port of Los Angeles, noted that businesses continue to move cargo as opportunities arise in the evolving trade environment, while sustained robust consumer demand keeps imports at historically high levels.
According to data from Cushman & Wakefield, the regional industrial market recorded its highest leasing figures in five years during the second quarter of 2026, benefiting from its central position in larger logistics networks. An analysis by Marcus & Millichap confirms that a more stable flow of goods has contributed to market stabilisation. Kidder Mathews also registered strong leasing activity in Los Angeles with 6.2 million square feet in the second quarter. This development led to a change in investor thinking, as Healy reports: 'People started saying, 'I need to get in there, I need to get a building now.''
Structural change and high technology as drivers
Shifts in shipping traffic, with the East Coast seeing more volume last year and West Coast ports regaining importance in 2026, are leading to an increase in warehouse rents. Although industrial rents have been declining since mid-2023, they are still 25 per cent above early 2020 levels in the long term. Healy points out that freight forwarders are trying to adapt their strategies to tariff policies and sees a 'golden window' for product movement before potential further tariffs.
A radical structural change in the regional economy, favouring advanced manufacturing, is also strengthening the industrial market near the ports. Healy forecasts future growth driven by demand from high-tech companies in defence and aerospace, as well as third-party logistics providers (3PLs) and transport service providers. Kidder Mathews reported that Watson Land Company concluded two new logistics leases totalling 150,000 square feet last quarter, and two new Rexford properties in Torrance are expected to be fully occupied by September.
Advanced manufacturing, particularly for firms in the aerospace and defence sectors, is currently absorbing available space in the regional warehouse market. Healy emphasises that Southern California's port region, traditionally trade-dependent, is now experiencing an overlay of aerospace, defence, and advanced manufacturing as the primary drivers of absorption. This is driving up rents for Class A buildings, while 3PL clients tend to be more cost-conscious.
- —The South Bay market recorded an impressive 1.8 million square feet of net absorption in the first quarter solely from aerospace and defence tenants.
- —The largest deal of the year was Valar Atomics, a nuclear startup, leasing a 500,000 square foot facility in Torrance.
- —Divergent Technologies followed with 415,000 square feet in Long Beach to expand its production of 3D-printed weapon and missile components for the US military.
Southern California boasts a unique ecosystem of established companies and talent that supports these industries. With improved funding and growth conditions at national and regional levels, the industrial market is benefiting significantly. Despite this growth, there is no wave of speculative new construction. In South Bay, only around 1.2 million square feet of new space is currently under construction, which is roughly the size of two Valar Atomics leases. Forecasts indicate a further increase in venture capital.
