Industrial real estate continues to demonstrate its importance within the commercial property market, but the latest numbers tell a more complex story than overall leasing activity alone might suggest.
Across the United States, industrial leasing gained considerable momentum during the second quarter of 2026. According to JLL, leasing activity reached 175.7 million square feet—an increase of 49.4% from the same period one year earlier. Much of that growth came from large occupiers, with leasing spaces measuring 500,000 square feet or more rising 58.3% year over year.
Those figures point to renewed confidence among major logistics, distribution, manufacturing, and e-commerce users. However, they do not mean every industrial property is experiencing the market in the same way.
In Greater Los Angeles, opportunity is being shaped not only by building size, but also by location, functionality, access, power capacity, loading, clear height, yard space, and the specific operational needs of today’s tenants.
Why Large Industrial Facilities Are Gaining Attention
Large industrial users are once again making longer-term real estate decisions after several years of economic uncertainty, shifting inventory strategies, and cautious expansion.
Modern distribution and manufacturing operations frequently require more than additional square footage. Many occupiers are prioritizing properties that can support automation, higher power demands, advanced equipment, efficient loading, employee access, and increasingly complex supply chains.
That has helped drive national demand for modern, large-format facilities. JLL reported that vacancy among Class A warehouses exceeding one million square feet tightened to 5.8% during the second quarter of 2026.
Nevertheless, increased big-box leasing does not necessarily diminish the importance of smaller and midsize industrial buildings. These facilities serve a different—and often highly localized—group of businesses, including contractors, suppliers, service companies, light manufacturers, wholesalers, creative businesses, aerospace-related firms, and growing owner-users.
The result is an industrial market with several distinct layers, each responding to different business needs and economic pressures.
The Los Angeles Market Has Its Own Dynamics
Los Angeles remains one of the country’s largest and most strategically important industrial markets. Its extensive consumer base, proximity to the Ports of Los Angeles and Long Beach, freeway infrastructure, and concentration of logistics, aerospace, manufacturing, entertainment, and trade-related businesses continue to support long-term demand.
Current conditions, however, are more balanced than they were during the exceptionally tight market experienced earlier in the decade.
Kidder Mathews reported a 6.0% direct industrial vacancy rate in Los Angeles during the second quarter of 2026, compared with 5.6% one year earlier. The average asking lease rate declined approximately 6.2% year over year to $1.37 per square foot per month on a triple-net basis.
At the same time, total availability decreased slightly from the previous year, and new construction remained limited. Only approximately 184,000 square feet of new industrial space was delivered during the quarter.
These mixed indicators suggest that Los Angeles is neither experiencing a broad industrial downturn nor a return to the highly competitive conditions of the pandemic-era market. Instead, the market is becoming increasingly selective.
Well-located, functional buildings can continue to attract demand, while properties with outdated configurations, insufficient power, limited loading, constrained access, or significant deferred maintenance may require more competitive pricing or physical improvements.
What This Means for Industrial Property Owners
Owners should be cautious about relying on broad industrial-market headlines when evaluating their property.
A building’s competitive position may depend on how effectively it supports the requirements of its likely tenant or buyer. Features such as power capacity, loading configuration, clear height, parking, secured yard space, freeway access, office-to-warehouse ratio, and the ability to accommodate modern equipment can materially influence demand.
This creates an opportunity for owners to evaluate their properties from an operational perspective. In some cases, targeted improvements—such as upgraded electrical service, refreshed office areas, improved lighting, enhanced security, or more efficient loading access—may help strengthen marketability.
Realistic pricing is equally important. As tenants gain more alternatives in certain submarkets, properties must be positioned according to current competing inventory rather than the peak rents achieved several years ago.
What This Means for Industrial Tenants
For tenants, the current environment may provide a valuable window to reassess space requirements and negotiate more strategically.
Businesses facing upcoming lease expirations may have more options than they did during the tightest years of the market. Depending on the property and submarket, tenants may be able to explore rental concessions, improvement allowances, renewal alternatives, or space that better accommodates future growth.
The lowest rental rate, however, does not always produce the lowest operating cost. An inefficient building can increase expenses through poor loading, inadequate power, excessive travel time, limited storage capacity, or a layout that requires additional labor.
Tenants should evaluate the total operational value of a property—not simply its square footage or asking rent.
What This Means for Investors and Owner-Users
For investors, a more selective market may create opportunities to acquire well-located industrial assets at a more supportable basis than was possible during the market’s most competitive period.
The strongest opportunities may not always be the newest or largest properties. An older building in a constrained infill location may offer long-term value if its physical characteristics remain functional or can be improved economically.
Owner-users may also benefit from moderating pricing and less competition for certain properties. Ownership can provide greater control over occupancy costs, building improvements, and long-term business operations, although financing, property condition, and future space requirements should be carefully evaluated.
Opportunity Is Becoming More Property-Specific
The resurgence in large industrial leasing is an encouraging signal, but size alone does not determine value.
In Los Angeles, industrial performance will continue to vary by submarket, building configuration, tenant profile, and intended use. Large logistics facilities may benefit from renewed institutional demand, while smaller infill buildings may remain important to businesses that need proximity to customers, employees, and established commercial centers.
The opportunity lies in understanding which segment a property serves—and positioning it accordingly.
For owners considering a sale or lease, tenants evaluating their next facility, and investors searching for acquisitions, informed property-level analysis has become increasingly important.
At Peak Commercial, can help evaluate current market conditions, identify relevant opportunities, and develop a strategy aligned with your commercial real estate objectives.
