Southern California’s industrial market is entering a period of rapid change, as new tariffs and shifting trade patterns reshape demand across the region. Vacancy rates are rising, tenant behavior is evolving, and investors are rethinking their strategies. We break down what’s driving the change—and how to stay ahead of it.

Tariffs, Trade Shocks, and the New Southern California Industrial Landscape

By Nina Hobson | June 2025

Tariffs Strain the West Coast Supply Chain

New federal tariffs, 10% on all imports with the potential for larger tariffs on a country specific basis, are straining Southern California’s trade-dependent industrial sector. The ports of Los Angeles and Long Beach, which handle roughly 35% of U.S. Ocean freight, anticipate a 35% drop in Asian cargo, echoing the National Retail Federation’s forecast of a 20% nationwide decline by the end of 2025.

Vacancy Rates Rise

Shrinking container volumes are reducing demand for industrial space. Vacancy rates have climbed across key markets:

Los Angeles County: 5.2% → 6.2%
Orange County: 4.2% → 5.8%
San Diego County: 6.6% → 9.4%
Inland Empire: 6.9% → 8.2%

Sublease space is accumulating, especially in port-adjacent areas like Carson, South Bay, and Inland Empire West.

Impact on Industrial Leasing, Valuations, and Building Demand

Cap rates are rising, pressuring valuations in high-exposure submarkets.
Tenants are avoiding long-term commitments, favoring short leases and early exits.
Smaller buildings (<50,000 SF) are leasing faster, while larger facilities face extended vacancies.

Southern California Hit Harder than National Trends

While national industrial trends show a slow rise in vacancies and tapering rent growth, Southern California is experiencing sharper disruptions:

A Shift Toward Reshoring and Manufacturing

Despite short-term uncertainty, tariffs are catalyzing long-term changes, namely, reshoring and diversified supply chains. Demand is growing for industrial space suited to assembly, light manufacturing, and logistics. “How much power does the building have?” is now a common tenant question.

Southern California’s logistics infrastructure and skilled labor force position it well to support a resourced manufacturing base, especially in areas hit hardest by the import decline.

An Evolving Market, not a Meltdown

This isn’t a dramatic collapse; it’s a market in transition. As the industrial landscape recalibrates, well-located, modern assets and flexible investment strategies will define success moving forward.

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