Vacancies for industrial buildings in the greater Los Angeles area, which is the largest market for this property type in the US, have surged to their highest level in a decade. This shift marks a significant change in the industrial landscape, with vacancy and availability reaching 10-year highs over the past 24 months, according to a report by real estate brokerage Colliers.

Initially, warehouses experienced high demand from commercial real estate investors amid the boom in online shopping during the pandemic. This surge in demand led to historic lows in industrial vacancies in the early months of 2022. However, factors such as a substantial increase in new construction, a slowdown in international trade, and rising borrowing costs have contributed to a cooling of the market.

Colliers reported that the vacancy rate for industrial buildings in the greater Los Angeles area rose to 4.1% in the first quarter of the year, up from 1.5% in the same period of 2023. Additionally, asking rents have decreased over the past year.

In the Inland Empire submarket, which is located east of Los Angeles and is a significant hub for big box and e-commerce logistics, the vacancy rate reached 6.2%, the highest level since 2013, according to Colliers.

Voit Real Estate Services, another entity tracking the industrial market, noted that the market dynamics in the Inland Empire are beginning to favor buyers and tenants. They anticipate ongoing pressure in the Inland Empire market due to significant construction activity, which will likely lead to higher vacancy rates and lower average asking lease rates and sales prices in the coming quarters.