Los Angeles Industrial CRE Market Update – 4th Qtr. 2025

Market Drivers

• The 2025 leasing and sales market showed steady improvement after a slow start, complicated by uncertainty around Liberation Day and tariffs. Expected supply chain disruptions never materialized. Tariffs were anticipated to trigger inventory challenges, but leasing demand strengthened and stayed resilient post-implementation. Likewise, the sales market gained momentum as sellers adjusted and buyers seized long-term opportunities in locations once priced at pandemic highs.

Leasing Demand

• By year-end, several notable transactions signaled a recovering market. FedEx’s 500,000 SF build-to-suit in Downey and multiple Amazon leases show leading logistics users are committing to space. Companies in Space, Satellite, Advanced Manufacturing, and emerging Nuclear Energy sectors are also securing locations—and paying premium rates—in El Segundo, Hawthorne, Torrance, and Long Beach. This segment shows no signs of slowing and may even accelerate.
• Demand for smaller footprints, particularly 50,000 SF and under, remains strong. Landlords are responding with free rent and tenant improvement packages to creditworthy tenants to maintain rates and annual escalations.

Sales

• The sales market continued to improve throughout the year. Morgan Stanley’s acquisition of Amazon’s 15-year leased investment near LAX highlights strong institutional appetite for quality assets, echoed by Fortress’s purchase of the UPS site in Inglewood. Cap rates have stabilized in the 5.5%–6% range. Owner-occupiers are returning as well, evidenced by General Matter buying a 34,000 SF building in North Redondo for over $400 PSF, following Terreno’s acquisition of a 100,000 SF compound in the same submarket at $355 PSF.

• Near-Term Outlook: We expect improvement to continue into early 2026, driven by strong leasing and purchase demand. Institutional buyers should stay active with lower interest rates and ample capital. Logistics and Advanced Manufacturing will lead. While global tensions may pose headwinds, tailwinds should carry the market into 2026.