Los Angeles’ Industrial Market Offers Users Compelling Opportunities

by John Nelson

— By Patrick Barnes of Avison Young — 

The Los Angeles industrial property market has experienced increasing space availability and shifting tenant priorities over the past several quarters. Due to concerns about potential labor strikes at East and Gulf Coast ports, the anticipated surge in short-term sublease demand failed to materialize in the fourth quarter of 2024. Additionally, with a labor contract agreement reached in January, any lingering expectations that rerouted shipments would continue to bolster West Coast activity have largely dissipated.

Patrick Barnes, Avison Young

Despite a 21.7 percent year-over-year increase in TEU (twenty-foot equivalent unit) volume from 2023 to 2024, sublease availability has risen significantly as TEU tenants have either warehouse capacity or shipments leaving the region by rail. Companies today are reassessing their space needs, focusing on cost savings and operational optimization rather than expansion to deal with inflation and tariffs. Sublease space increased by 12.8 percent quarter over quarter, reaching 11.2 million square feet and pushing the overall availability rate to 9.3 percent. 

These changes have also led to a drop in industrial rental rates. After peaking at $1.97 per square foot in 2023, average rents have fallen 26.4 percent to $1.45 per square foot in fourth-quarter 2024. However, Class A properties have shown resilience. They’ve experiencing only modest declines of less than 13.3 percent compared to steeper drops in Class B (about 25 percent) and C (30 percent) assets. 

While leasing activity remains active as businesses take advantage of lower rates, transaction volume has yet to reach pre-pandemic levels. In response, landlords have become competitive with incentives, offering rent abatements, tenant improvement allowances and options to purchase. Concessions that were largely absent during the high-demand pandemic years are now being used to attract tenants and close deals.

These market dynamics present compelling opportunities for businesses to thrive in a historically supply constrained market. Higher availability rates and declining rents mean users now have more options for locations and quality buildings that align with their operational needs both now and in the future. Unlike past years when record-low vacancies constrained options, occupiers can now explore different submarkets throughout the Los Angeles region to optimize costs and logistics. The increase in landlord concessions and drop in lease rates enable established tenants to secure favorable lease terms that were previously unattainable.

We believe these market conditions will be short-lived as the industrial marketplace continues to adjust. Businesses that act soon will enjoy a competitive advantage and can secure high-quality industrial space with tenant-friendly lease terms.

— By Patrick Barnes, Principal, Avison Young. This article was originally published in the April 2025 issue of Western Real Estate Business.

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