The industrial real estate market in Los Angeles County continued its recovery over the summer. This manifested in the fourth consecutive quarter of positive net absorption and the first annual decline in the vacancy rate for at least two years. A recent report by CBRE highlights these developments.
In the third quarter, industrial tenants absorbed 1.9 million square feet of space, a significant contrast to the negative 2.4 million square feet in the same period last year. Year-to-date absorption totals 5.1 million square feet, after the market experienced quarterly losses for over two years, from mid-2023 to the end of 2025.
Vacancy and Rents in Detail
The vacancy rate decreased by 20 basis points to 5 percent compared to both the second quarter and the previous year. Leasing activity reached 13.7 million square feet, representing a 6.5 percent increase year-on-year. However, leasing volume decreased by 15.7 percent compared to the second quarter.
Large warehouse spaces, in particular, saw strong demand. Industrial buildings of at least 250,000 square feet contributed almost 2.1 million square feet to positive absorption in the third quarter. These properties accounted for approximately 96 percent of the space absorbed this year. Smaller industrial properties, conversely, experienced a decline; buildings under 50,000 square feet recorded negative absorption of 320,000 square feet in the quarter and 1.43 million square feet up to September.
Despite the improved occupancy, average direct asking rents on a net basis remained stable at $1.19 per square foot per month. This follows declines in 10 of the preceding 11 quarters. This value remains 4 percent below the average of the previous year and 30.4 percent below the peak of $1.71 per square foot recorded in the third quarter of 2023.
Regional Differences and Development Pipeline
Within the county, Central L.A. led with 1.11 million square feet of positive absorption, followed by the South Bay with 488,000 square feet and the San Gabriel Valley with 442,000 square feet. Only the greater San Fernando Valley was the sole submarket with negative absorption, at 238,000 square feet. The South Bay continued to establish itself as the county's most active leasing market with 4.46 million square feet of transactions in the third quarter.
On the development side, 717,000 square feet of construction space was completed in the third quarter, a 38.1 percent decrease year-on-year. However, the pipeline increased by 11.3 percent from the second quarter to 4.48 million square feet. This marks the first quarterly expansion since early 2025. A further 1.42 million square feet of speculative industrial projects are expected to be completed in the fourth quarter, which could test the market improvement.
