Inland Empire Industrial Slump Deepens, But Brokers Say Rebound May Be Near

Industrial vacancy and rents in the Inland Empire have continued to deteriorate, but a surge in leasing and a sharply shrinking development pipeline have brokers betting the market is nearing its inflection point.

The area's vacancy rate reached 7.8% in the first three months of 2026, and negative net absorption hit 4.7M SF, according to a report from CBRE. The negative absorption included four 1M SF spaces that went vacant in the quarter. 

“It was those major move-outs in those massive blocks of space that really drove the negative net absorption this quarter,” CBRE Research Manager Rick Cozart said. 

Those big move-outs were situations where leases expired and tenants either consolidated into smaller existing space, left the Inland Empire market or moved into another building in the region. 

Other brokerages tracked similar figures. Colliers pegged vacancy in the Inland Empire at 8.1%, with negative net absorption of 3.6M SF — the third-lowest total on record. 

The Inland Empire is a massive market with a total inventory of 660.4M SF as of Q1 2026, according to Colliers. But that means that with an 8.1% vacancy rate, there is about 53.6M SF of industrial space sitting empty in the market right now. 

National conditions are improving, with vacancy dropping below its 2025 peak and net absorption in the positive and rising, according to a Q1 Cushman & Wakefield report. West Coast markets, on the other hand, posted occupancy declines due to a mix of consolidations and relocations. 

Asking rents in Southern California continue to decline, as they’ve done for about three years. Colliers tracked rents in the Inland Empire West at an average of $1.10 per SF, while the IE East averaged 90 cents per SF, leading to a marketwide average of $1 per SF. 

There’s a lack of consensus on whether rents have further to fall in the market, and that’s adding a layer of complication to transactions, especially to sales transactions, Colliers Senior Vice President Kenny Patricia said.

“It was really easy to underwrite an opportunity when people would ask you what the market lease rate was, and you'd say, ‘Well, just put 5 cents on whatever the last deal was,’ when things were really hot,” Patricia said. 

Now, with competing ideas about where rents are heading, evaluating investments is more challenging. 

The IE East has “pockets of concern” from both a vacancy and availability standpoint that suggest rents there may still have further to fall, Patricia said.

Leasing volume, which includes new leases as well as renewals, totaled 22.3M SF in the core of the Inland Empire, a 45.5% increase quarter-over-quarter from 15.3M SF in Q4 2025 and a 21.9% increase year-over-year. Of that square footage, 13.6M SF, or roughly 61%, was new leases. 

Cozart estimated that around half of all leasing activity at the beginning of this year came from third-party logistics companies, and automotive-related users, like tire companies, are also actively leasing.  

The volume of projects in the construction pipeline has slowed. Roughly 102K SF came online in the first quarter of 2026, a sharp contrast to the nearly 2M SF that had come online in the same period the previous year. 

That slowdown signaled to some in the industry that future vacancy growth wouldn’t be an issue. 

“Because the construction pipeline is really dwindling, we're not going to see major increases in vacancy the way that we have over the last two years,” Patricia said. “That's not something that you can just turn off and on, like a water spigot. It takes a long time to get entitlements.”