What’s Next for the West Coast Industrial Real Estate Market?
The industrial landscape has experienced no shortage of challenges and related headwinds in the last few years.
Each market has its own unique story, but they have all been a part of a transforming environment that is shifting attitudes towards risk, building design, pricing, and real estate professionals in entirely new ways.
With continued uncertainty looming, industry professionals are keeping a close eye on what lies ahead for the sector. The latest research from Cushman & Wakefield (NYSE: CWK) highlights the U.S. industrial market’s continued resilience in the second quarter, despite broader economic doubts and regional volatility. National net absorption totaled 29.6 million square feet (MSF), on par with the first quarter’s 30.3 figure and exceeding expectations, with demand concentrated in newly built logistics product.
Research also noted the West Region had -2.3 million square feet of net absorption, driven by significant occupancy losses in the Inland Empire and Los Angeles (-1.8 and -1.1 MSF respectively). Contributing to the pullback, container volumes at the Ports of Los Angeles and Long Beach declined by 24% month-over-month in May. However, they climbed modestly in June as the U.S. and China agreed to a 90-day pause on rising tariffs.
To help provide better insights into where the market is heading, I had the opportunity this week to speak with a number of top brokers at Cushman & Wakefield about leading trends. Provided are some of the key takeaways:
“Industrial investor activity increased in May and June throughout the West Coast markets but most notably in Southern California where rents and values for have been compressing over the last two years. General underwriting assumptions are getting more aggressive following improving sentiment. It seems that at least some investors are sensing the market bottom.” -Rick Ellison
“The West-coast industrial capital markets have experienced a tremendous amount of increased activity as investors reengage in the most sought-after locations in the country. The three major gateway markets in the West (Seattle, NorCal, and SoCal) are experiencing the most inbound interest. The key secondary markets didn’t see the huge spikes in rent increases and cap rate compression and are becoming a close equilibrium in yields to the Gateway markets. We are extremely bullish on the balance of 2025 and 2026.” -Bryce Aberg, SIOR & Brant Aberg, SIOR
“As of mid-2025, the Inland Empire industrial market remains in correction mode following the pandemic-era surge in rents and property values. Occupiers have slowed the pace of space contraction, but we are still seeing space givebacks. There are signs of renewed activity, particularly among major corporate occupiers – many pursuing built-to-suit solutions. The BTS requirements are encouraging but are not addressing the vacancy rate, which continues to rise moderately. Tariff concerns have contributed to a slowdown in decision-making and overall demand, though some tenants are beginning to shrug off these uncertainties and move forward. More reasonable rents have also made tenants more comfortable. Importantly, the shrinking development pipeline is beginning to constrain future supply, which should positively impact vacancy rates and lead to upward pressure on rents beginning in 2026, particularly for Class-A product.” -Phil Lombardo
“Denver’s market is emerging from an 18-month cooldown that followed peak post-2020 levels in net absorption and rental growth. The last quarter brought a clear rebound in leasing activity, signaling renewed market confidence. With developers slowing new construction, supply and demand are beginning to rebalance leading to tighter vacancy rates and expected rental growth through the rest of 2025 and into 2026. Investor interest remains strong, demonstrated by a record-setting $544 million in Q2 2025 transaction volume. While we remain vigilant amid broader market shifts, Denver’s industrial sector continues to display resilience and sustained forward momentum.” -Drew McManus, SIOR
“The Los Angeles infill industrial market is in the midst of a true correction. After a decade long bull run, rental rates have pulled back more than 35 percent from peak levels. Institutional owners are actively recalibrating strategies, while occupiers are capitalizing on the current market reset. The tariff war weighed heavily in the first half of 2025, stalling deal flow and slowing tenant decision making. That said, there are early signs of renewed confidence, with a noticeable uptick in activity that we expect to convert into lease transactions in the back half of the year.” -Rusty Smith, SIOR
“The Valley of the Sun continues to experience solid industrial demand. 500K to 1M SF tenants continue to be the most active segment. Given our economic diversification, pro economic growth policies and strong local economy, we expect continued current demand with an uptick in the smaller size requirements. Institutional Capital is bullish on Phoenix based on current and future market conditions.” -Mike Haenel
Despite economic uncertainty clouding forecasting, the future of industrial real estate has significant advantages and a positive long-term outlook. However, if we have learned anything in recent years it is to expect the unexpected. Those who are able to maintain a nimble mindset will be best equipped to capitalize on whatever tomorrow brings.
