The market remains active with 10.1M SF under construction and 3.4M SF of new deliveries in Q3 2025, even as vacancy rises to 8.4% and net absorption turns negative at 1.4M SF—creating favorable opportunities for tenants. Average asking rents of $13.10/SF, combined with abundant sublease space and concessions, are driving competitive leasing dynamics. On the investment side, Q3 sales reached $310M with cap rates averaging 4.7% and pricing at $266/SF, underscoring attractive acquisition prospects in a market supported by strong fundamentals.

Inland Empire Demographics

• Unemployment Rate: 5.3%
• Current Population: 4,778,947
• Households: 1,507,271
• Median Household Income: $93,104

 

Inland Empire, now home to roughly 4.8 million residents, holds the title of the 11th-most populated market in the U.S. and continues to benefit from its affordability and proximity to Southern California’s ports. Post-pandemic, the region added more than 114,000 jobs, fueled by transportation and warehousing employment, which has grown nearly 30% above pre-pandemic levels to over 200,000 workers. The long-term job growth forecast, despite having slowed below 1% YOY in mid-2025, continues to outpace the national average. The market’s economic base is anchored by e-commerce, with Amazon expanding to more than 40 facilities and employing about 30,000 workers locally. Inland Empire’s appeal extends beyond logistics: its retirement communities support strong healthcare demand, while tourism hubs such as Palm Springs, Big Bear, and Temecula bolster the local economy.

 

Market Performance

So far in Q3 2025, the Inland Empire’s industrial market is navigating a cooling phase marked by weaker demand and elevated supply. Vacancy has climbed to 8.4%, the highest level in over a decade, as tenant move-outs and slower leasing momentum resulted in negative net absorption of 1.4M SF, even as 3.4M SF of new product was delivered this quarter. Asking rents have adjusted downward, averaging $13.10/SF, representing a 3.3% decline year-over-year, as landlords contend with rising availability and a surge of discounted sublease space that now accounts for a meaningful share of listings.

 

Investment activity remains muted relative to historical highs, with $310M in sales volume, pricing averaging $266/SF, and cap rates steady at 4.7%, reflecting investor caution amid softening fundamentals. On the development side, the once-robust pipeline has thinned considerably: only 10.1M SF remains under construction, a fraction of the 45M SF underway at the 2022 peak, as tighter lending conditions, higher capital costs, and weaker leasing prospects have curtailed new starts.

 

Overall, Q3 reflects a market in recalibration. While the Inland Empire retains its long-term strategic advantages—its scale, proximity to the ports, and role as the nation’s leading logistics hub—current performance underscores a period of adjustment as occupiers reassess space needs and developers and investors take a more cautious stance.

 

Performance by Industrial Type

Source: CoStar Group, Inc.

 

Inland Empire Construction

 

Inland Empire’s industrial construction pipeline has contracted sharply, with 10.1M SF underway. Deliveries total 3.4M SF this quarter, while new starts have slowed to just over 3M SF in the first half of the year as softer leasing demand, falling rents, and tighter lending have curtailed speculative projects. Only 35% of space underway is pre-leased, with availability especially high in mid-sized buildings, though mega-projects like Amazon’s fulfillment centers remain largely secured. Construction remains concentrated in core submarkets such as Ontario, Rancho Cucamonga, and Fontana, but rising community resistance and local moratoriums are adding further constraints on future development.

Construction Starts (SF)

Source: CoStar Group, Inc.

 

Under Construction (SF)

Source: CoStar Group, Inc.

 

 

Inland Empire Sales Activity

Sales activity in the Inland Empire’s industrial market has been limited, totaling $310M in transaction volume as investors remain cautious in the face of rising vacancies and softening rent growth. While the region continues to benefit from its modern logistics stock and long-term strategic role as Southern California’s distribution hub, current market dynamics have tempered investment momentum. Average sales pricing stands at $266/SF, reflecting a roughly 15% pullback from the peak achieved in 2022, while cap rates have drifted upward to 4.7%, up from the ultra-competitive 4% range seen during the last cycle of peak liquidity. Institutional players such as Prologis, Blackstone, and Rexford remain active, though deal flow has slowed considerably compared to the record $10B in sales posted in 2022. Investors are now underwriting more conservatively as weaker leasing trends and asking rents at $13.10/SF pressure near-term yield growth, but many remain focused on the Inland Empire’s long-term fundamentals, anticipating renewed rent appreciation and improved occupancy once the current wave of supply is absorbed.

 

Sales Volume & Price Per SF

Source: CoStar Group, Inc.

 

By the Numbers

Q3 2025 | Source: CoStar Group, Inc.

• • Sales Volume: $310M
• • Average Sale Price Per SF: $266
• • Cap Rate: 4.7%
• • Vacancy Rate: 8.4%
• • Rent Growth: (3.3%)
• • Average Market Asking Rent Per SF: $13.10
• • SF Under Construction: 10.1M
• • SF Delivered: 3.4M
• • SF Absorbed: (1.4M)