LA North Industrial Market Gains Momentum as Leasing and Investment Activity Accelerate
Los Angeles North Industrial Market Strengthens as Leasing and Investment Activity Accelerate Despite Softer Occupancy
Slowing construction, resilient leasing activity, and accelerating investment sales offset continued occupancy challenges.
Development remained limited while investors and tenants returned despite softer occupancy fundamentals.
Market Overview
The Los Angeles North industrial market continued to navigate a period of adjustment during the first half of 2026, as development remained restrained while leasing and investment activity accelerated, even as occupancy fundamentals softened. The region recorded negative net absorption of 155,501 square feet during the second quarter, improving significantly from the 977,116 square feet of negative absorption recorded in the first quarter. While year-to-date absorption remains negative at 1.1 million square feet, the slower pace of move-outs suggests occupancy conditions are beginning to stabilize. Developers also remained cautious, with no new industrial product delivered during the quarter. Year-to-date completions totaled just 49,791 square feet, while the construction pipeline stood at 949,404 square feet, down 26.9 percent from one year earlier, reflecting continued discipline in new development.
Despite softer occupancy trends, market fundamentals remained relatively stable. Vacancy increased modestly to 7.3 percent, a 10-basis-point increase from 7.2 percent in the first quarter and 220 basis points higher than the 5.1 percent recorded a year ago. Availability also edged higher to 8.8 percent from 8.2 percent during the prior quarter and is up from 7.6 percent one year ago, reflecting additional space being marketed. Rental rates remained relatively stable, with the average asking rent holding at $1.45 per square foot NNN during the second quarter, unchanged from the prior quarter and only 0.6 percent below year-ago levels.
Trends to Watch
Leasing activity strengthened considerably during the quarter, with volume climbing 36.6 percent quarter over quarter to nearly 2.0 million square feet. First-half leasing activity totaled 3.37 million square feet, nearly 10 percent ahead of the first half of 2025, signaling that tenant demand remains active despite elevated availability and vacancy.
Investment activity accelerated meaningfully during the first half of 2026. Sales volume totaled 450,541 square feet during the second quarter, bringing first-half transaction volume to 1.79 million square feet, more than double the 879,000 square feet recorded during the same period last year. Dollar volume reached $499.1 million through the first half of the year, a 66.0 percent increase year over year. Average pricing adjusted to $279 per square foot in the second quarter, down 10.0 percent from the prior year, reflecting continued price discovery as buyers and sellers work toward more realistic valuations.
Taken together, the slower pace of negative absorption, constrained construction pipeline, resurgent leasing volume, and sharp rise in investment activity point to a market gaining traction. While vacancy and availability remain above year-ago levels, renewed leasing and investor demand position the market for improving balance heading into the second half of 2026.
