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4/01/26
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This report provided by real estate services firm NAI Capital Commercial
MARKET OVERVIEW
Los Angeles County remains the largest industrial market in Southern California by existing rentable area, with 904.3 msf. Only 630.4k sf of new industrial space was delivered in the quarter, down 40.0% from Q1 2025. Available space reached 74.2 msf in Q1 2026, representing an availability rate of 8.2%, up 30 basis points from 7.9% a year ago. Vacancy reached 6.6%, up 70 basis points from the year-ago rate of 5.9%, reflecting rising move-outs and weak leasing demand.
Net absorption in Los Angeles County turned sharply negative in Q1 2026, reaching -3.1 msf, a reversal from positive 1.1 msf a year ago and 1.3 msf in Q4 2025. Leasing volume declined 9.6% year-over-year to 10.3 msf, though it rose 10.5% quarter-over-quarter.
Average asking rent fell 6.8% year-over-year to $1.38/SF (triple net), down from $1.48 a year ago. On a quarter-over-quarter basis, rent also declined 2.1% from $1.41 in Q4 2025. The median sales price registered $299/sf in Q1 2026, down 2.2% from $306/sf a year ago, reflecting a shift in the mix of assets transacting during the quarter. Still, the quarterly rebound signals returning market confidence, with pricing recovering 7.4% from Q4 2025 even as it remains below the Q1 2024 peak of $330/sf.
Total sales volume came in at $1.2 bil, a 10.1% decline from a year ago, though activity rose 12.9% quarter-over-quarter. Sales volume measured in square feet declined 2.6% quarter-over-quarter and 20.4% year-over-year, suggesting the dollar volume recovery was driven by higher-priced, higher-quality transactions rather than a broader increase in deal count.
Space under construction stood at 2.2 msf, down 59.2% year-over-year. This represents the most abrupt decline in the development pipeline since the Great Recession. This pullback, combined with the county's inherent land constraints, is expected to limit further availability growth over time.
TRENDS TO WATCH
While near-term fundamentals remain under pressure, the pullback in new supply is a clear response to market oversupply and shifting pricing. This shift will help tighten availability and drive demand over the medium term. LA's land constraints and long-term value appreciation limit the ability to replenish the pipeline quickly. This supply-side pressure supports a gradual stabilization of vacancy, rental rates, and sales pricing as demand ultimately begins to rebalance heading into the second quarter of 2026.
This report prepared by J.C. Casillas, Managing Director, Research, NAI Capital Commercial
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