Not So Sunny: SoCal's Hot Warehousing Market Cools Down

Southern California’s previously red-hot warehousing market is beginning to cool down. Notable for being one of the tightest industrial real-estate markets in the U.S., a recent influx of vacancies is drawing industry attention. According to Savills, a real estate services firm:

• Vacancy rate in the logistics-focused Inland Empire region surged to 3.8% in Q2, up from 1.2% a year earlier.

• This change still falls below the nationwide vacancy rate of 4.8%, but marks a significant shift from a nearly fully occupied market.

For the first time in two decades, more warehouse space became available than was leased in this region. The rise in vacancies is attributed to soaring rents, dwindling imports due to a 4% decline in U.S. imports in the first half of this year, and increased operational costs, prompting companies to explore alternative regions for warehousing.

For instance, the Port of Los Angeles and Long Beach reported handling 1.3 million fewer containers in H1 2023 compared to H1 2022. Even with rising vacancy rates, Prologis, a leading logistics property builder, stated that its Southern California warehouses were 97% occupied in Q2, down from 99% last year.

Source: The Wall Street Journal