Inland industrial market faces hurdles heading into next year

The Inland Empire industrial market isn’t riding high as 2026 approaches.

Not that the market is collapsing – far from it – but industrial development in Riverside and San Bernardino counties did ease up in 2025 compared with previous years, and its days as a juggernaut appear to be on hold, at least for now.

One broker who has been negotiating industrial deals in the two-county region since the mid-1980s said he expects the market to perform well, but not spectacularly, during the next 12 months.

“The industrial market definitely flattened out in the second half of 2025, and I expect the first half of 2026 to be like the second half of this year,” said Chuck Belden, executive vice chairman with Cushman & Wakefield Ontario. “I think there will be some absorption next year, but not much. It won’t be wildly exaggerated like it has been in previous years.”

The term “mixed bag” might best describe the Inland industrial market as 2025 comes to a close.

During the first two quarters, vacancy hovered between seven to nine percent before it “stabilized” at 6.7 percent in the third quarter, according to CBRE.

The region experienced negative net absorption during much of the year, as new supply outpaced demand. But that category rebounded during the third quarter, as more than three million square feet of industrial space was added to the market during that time.

That increase was driven mostly by companies moving into buildings 500,000 and larger, according to CBRE.

Despite much available space, average lease rates rose only two cents between the second and third quarter in the Inland Empire Core, generally defined as Riverside, San Bernardino, Ontario, Corona, Fontana, and Redlands.

New leasing remained strong, with 11.5 million square feet of gross activity in those six markets, and 11.6 million square feet in the Inland region overall.

Construction numbers were the weakest category for the Inland Empire during the third quarter. Only 50,000 square feet of new projects broke ground, while the amount of industrial space under construction fell to 7.7 million square feet during the third quarter, the lowest number since the first quarter of 2013.

Despite that, CBRE credited the Inland Empire industrial market with showing resilience during the third quarter despite an uncertain economy, an assessment that could probably be applied to the entire year.

Twenty twenty six could require more of the same resilience.

“We’re still seeing activity, and it’s generally good activity,” Belden said. “What we’re missing is global and corporate tenants coming into the market. Hopefully, we’ll see more of that in 2026.”

Belden predicts more warehouse-distribution development construction in the High Desert, enough that some projects could end up in Kern County and Antelope Valley, both of which border the Inland Empire but are not part of it. Also, more large industrial development should land in Banning and Beaumont, and possibly around Palm Springs.

Because they’re remote with much large open space, those markets will attract “big-box” industrial projects, meaning anything 500,000 square feet or larger. After exploding during the pandemic that market has cooled, with less leasing and higher vacancy rates.

But big-box will continue to be a major player in the Inland Empire industrial market in 2026, according to Belden.

“It’s getting pushed further out, because it’s difficult finding sites large enough to handle those buildings that aren’t already occupied,” Belden said. “But other than that, it’s not going anywhere.”

Leases will remain low, and some property owners will start offering incentives – including free rent for a few months – in order to get leases signed.

“That’s already back in play on certain sites,” Belden said. “It just depends on the credit of the tenant, and the length of the lease.”

But another Inland broker, one who has been in the business since 2008, has a rosier outlook on 2026.

“I feel pretty positive,” said Ryan Lal, partner with Voit Real Estate Services Ontario.  “Consumer confidence is getting better, and more companies are taking buildings on both sides of the market.”

Leasing improved in 2025, and that trend should continue in 2026, according to Lal.

“I think leasing velocity should continue to pick up,” Lal said. “Not like what we saw during Covid, but at least we’ll be going in the right direction. I think the market will do better than it did in 2025, and definitely better than 2024.”

Lal added that he’s not concerned about tariffs, despite the concerns of some economists who fear they could tank the economy.

“We’ve had them for almost a year,” Lal said. “They’ve had an impact, but I think people are learning how to deal with them.”