IE Business Daily Business news for the Inland Empire.
The Inland Empire industrial market definitely performed well in 2025.
Fourteen of the 100 largest industrial leases in the United States last year were completed in either Riverside or San Bernardino County, the most of any major industrial market, according to CBRE.
Collectively, those leases covered nearly 12 million square feet. Chicago, which had eight leases that covered 8.7 million, was second on the list. That the Inland region outperformed the rest of the country despite facing serious obstacles – tariffs, and the higher cost of capital – “solidifies the Inland Empire’s position as the country’s premiere distribution hub,” CBRE stated in its report.
However, the Inland Empire’s industrial market ended 2025 on a down note, with vacancy up and absorption, lease rates all heading down.
The war in Iran could keep the latter trend going well into 2026.
The two-county region’s more that one billion square feet of warehouse-distribution space could be hurt by a rise in gas prices brought on by the war with Iran. Besides higher operating costs, higher diesel fuel prices will make it more difficult for trucks to move in and out of the Inland region.
So far, the price of gasoline has only gone up a few cents, but that could change if the war expands, said Jay Prag professor of economics at the Drucker School of Management at Claremont Graduate University.
“This is going to slow down any large-scale projects,” Prag said. “At best, we’re going to be in a holding pattern in that category for a little while. For the people who would have been the beneficiaries of those projects, that’s unfortunate.”
At the start of the year, Prag said he was optimistic about the Inland economy, but that optimism came with a major condition attached.
“In January, I thought all we needed to have a good year was stability, because stability will allow businesses to move forward even if the economy isn’t that great,” Prag said. “Well, we just got a big dose of instability, and thats’s the one thing we didn’t need.”
Unless there’s a quick end to the war, it’s possible that gas prices could go up 50 cents a gallon or more, Prag said.
“If things get worse, gas prices will go up a lot more than that,” Prag said. “I admit that’s a random prediction based on the uncertainty the war is already causing, and not on data. But people are thinking we’re more likely to use up our gas inventories than add to them, and that’s going to cause problems.”
If that happens, one of the Inland Empire’s biggest industries and source of jobs – logistics – would feel the impact. With higher diesel fuel prices, traffic would slow down and, over time, growth could also slow down.
“Almost everything that comes into the Inland Empire has to get out of the Inland Empire,” Prag said. “It gets distributed on trucks and trains, but all of it needs fuel no matter how it gets delivered. If diesel prices go up it will slow everything down. That is not good news for the Inland Empire.”
Because an estimated 40 percent of the goods shipped into the United States end up in Inland Empire warehouses, any slowdown here would be be felt nationwide. But with the war only slightly more than one week old, it’s too early to predict its impact.
“No one has any idea how long this engagement will last, so it’s difficult to say what it will do to the price of gas or the economy,” said Taner Osman founder of Westwood Economics in Los Angeles. “There was some speculation that the price of oil could go up 50 percent or higher – more than $100 a barrel – but that hasn’t happened. Oil prices have backed up a little bit.”
The stock market has also been resilient, bouncing back from several double-digit drop shortly after the war began. That was an unlikely reaction to a war in the Middle East, particularly one that involves the United States, Osman said.
“If this goes on for a couple months, and Iran starts blowing oil tankers, and the Strait of Hormuz is shut down, then you will see gas prices go up, and interest rates as well,” Osman said. “That could create a volatile economic climate. I think most people are in a wait-and-see stance right now.”
Past behavior shows how people will react if the price of gas goes up significantly.
“We know people are sensitive to gas prices,” said Osman, who has done extensive work in the Inland Empire during is career. “In 2008, when there really was a gas shortage, people cut back on their driving, and they started using public transportation more.
“I don’t think we’re close to that happening now.”
We might not get there at all, said another economist familiar with economies of Riverside and San Bernardino counties.
“I don’t think an increase in oil prices would have as dramatic an impact as some people say it will,” said Manfred Keil, chief economist with the Inland Empire Economic Partnership. “Since the attacks on Iran started, gas prices have only gone up two or three cents. I don’t understand what the panic is about.”
That’s not to say that the Inland Empire economy doesn’t have obstacles to overcome. At the moment, only three sectors – health, public education, and logistics – are doing well, and logistics is hurting in some areas, according to Keil.
All of the Inland region’s other major job sectors, including the state and federal government, have lost jobs in the last year.
“The Inland Empire economy does have problems, but none of them have anything to do with the price of oil,” Keil said, “I don’t see much of a problem for the Inland Empire if the price of oil does go up.”
