If you’re feeling the pressure of finding the right industrial space in today’s competitive LA market, you’re not alone. I’ve spent the last 18 years helping businesses navigate these exact challenges.
The eCommerce boom has transformed our industrial landscape, especially near the LA and Long Beach Ports, creating both obstacles and opportunities for businesses like yours.
I understand the frustration of balancing location, functionality, and cost in this rapidly evolving environment. In this article, I’ll share insights from the frontlines to help you make informed decisions about your industrial space strategy.
Key Takeaways
- Properties within 15 miles of LA/Long Beach Ports command premium rates and have appreciated 70% in five years.
- Last-mile facilities in populated areas are essential for same-day delivery, driving unprecedented demand for industrial space.
- Multi-story industrial buildings are emerging to maximize cubic footage on smaller land footprints near ports.
Table of Contents
eCommerce Growth: The Catalyst for Industrial Space Demand
When I started in this business 18 years ago, industrial properties were often overlooked in favor of flashier office and retail developments. Fast forward to 2025, and industrial has become the darling of commercial real estate in Los Angeles County.
The explosion of eCommerce has fundamentally changed consumer behavior. Today’s shoppers expect fast—often same-day—delivery of everything from groceries to furniture. This shift has created unprecedented demand for strategically located industrial space to support the complex logistics networks needed to fulfill these expectations.
Many businesses are pivoting from traditional brick-and-mortar retail to hybrid models requiring substantial industrial footprints. We’re seeing retailers maintain fewer storefronts while significantly expanding their warehouse space to support growing online operations.
The Last-Mile Revolution
The most significant change in the market is the intense competition for “last-mile” facilities—smaller industrial properties positioned in densely populated areas that allow businesses to deliver products to customers within hours.
These properties, once considered secondary industrial assets, now command premium rates due to their strategic importance in the eCommerce delivery chain. Older buildings in well-located areas often secure pricing that would have been unimaginable five years ago simply due to their location advantage.
The Port Factor: Why LA/Long Beach Proximity Drives Premium Values
Los Angeles and Long Beach Ports collectively form one of the busiest port complexes in the Western Hemisphere. The strategic importance of these ports cannot be overstated in today’s global supply chain ecosystem.
Gateway to Asian Markets
For businesses importing products from Asian manufacturers, proximity to these ports represents substantial competitive advantages in both time and cost. Companies are increasingly relocating their distribution operations from inland areas specifically to be closer to the ports.
This proximity can cut days off product availability timelines, translating directly to improved customer satisfaction and increased sales volume despite the substantially higher real estate costs near the ports.
The Congestion Factor
Anyone who’s spent time in Los Angeles knows our transportation infrastructure faces significant congestion challenges. For industrial users, proximity to the ports isn’t just about being close to where goods enter the country—it’s about minimizing exposure to unpredictable traffic delays.
Properties within a 15-mile radius of the ports have seen particularly dramatic value appreciation, as companies increasingly recognize that the cost premium for these locations is justified by the operational efficiencies they enable.
Changing Industrial Space Requirements
The industrial properties in highest demand today look substantially different from those sought after a decade ago. Modern eCommerce operations require specific features that many older industrial buildings simply don’t offer.
Height and Clearance
While 24-foot clear heights were once considered adequate, today’s most sought-after properties offer 32+ foot clearances to accommodate modern racking systems and automated retrieval technologies. This requirement alone has rendered millions of square feet of older industrial stock functionally obsolete for major distributors.
Many property owners are finding that complete redevelopment makes more financial sense than trying to retrofit existing structures, as the increased cubic footage and modern specifications can result in substantial increases in rental income.
Power and Connectivity
Today’s industrial users require substantial power capacity and connectivity infrastructure. Automated systems, climate control for specialized products, and employee comfort all drive increased power requirements.
Properties with robust electrical infrastructure and access to high-speed data connections command significant premiums in today’s market. Many tenants will pass on properties with otherwise ideal locations if the power infrastructure can’t support their operational needs.
Adaptive Reuse: Reimagining Spaces to Meet Industrial Demand
Given the shortage of available land for ground-up industrial development near the ports, adaptive reuse has become increasingly common. We’re seeing creative conversions of everything from defunct shopping centers to outdated office buildings to meet the insatiable demand for industrial space.
Retail to Distribution
The challenges facing some retail sectors have created opportunities to repurpose struggling retail properties for industrial use. Failed big-box retail locations often feature ample parking, loading access, and central locations that make them ideal for conversion to last-mile distribution facilities.
Multi-Story Industrial: The Vertical Future
Perhaps the most interesting development in the market is the emergence of multi-story industrial buildings—a concept long established in land-constrained Asian markets but relatively new to Southern California. With land costs near the ports reaching unprecedented levels, building up has become economically viable despite the higher construction costs.
Several developers are now planning multi-story fulfillment centers near the ports, stacking traditional warehouse functions with specialized freight elevators and ramp systems to maximize cubic footage on relatively modest land footprints.
Sustainability: The Green Industrial Revolution
Environmental considerations have become increasingly important in industrial real estate, particularly in California with its progressive environmental regulations.
Electric Vehicle Infrastructure
As companies transition their delivery fleets to electric vehicles, properties with substantial electrical capacity and charging infrastructure are seeing increased demand. EV readiness is quickly becoming a standard site selection criterion for forward-thinking operators.
Solar Potential
The vast roof areas of industrial buildings make them ideal candidates for solar installation. Properties with solar generation capacity offer both environmental benefits and potential operating cost advantages. Solar readiness is increasingly becoming a standard requirement for industrial acquisitions.
Investment Trends: Industrial as a Preferred Asset Class
The fundamentals driving industrial demand have made these properties increasingly attractive to investors of all types.
Institutional Capital Focus
Institutional investors who once concentrated on office and retail have dramatically shifted their allocations toward industrial properties. Cap rates for prime industrial assets near the ports have compressed to levels once reserved for trophy office buildings, reflecting the strong growth prospects and stability of these investments.
Private Capital Competition
The relative management simplicity of industrial properties compared to other commercial asset classes has attracted substantial private capital. Smaller industrial properties are trading at cap rates that would have been unthinkable just a few years ago, driven by high-net-worth individuals seeking stable income streams in a growth sector.
Looking Ahead: Future of Industrial Demand in Los Angeles
Having worked through multiple real estate cycles, I’m often asked if the current industrial boom is sustainable. While no market increases indefinitely, several structural factors suggest continued strength in the industrial sector.
Reshoring and Redundancy
The supply chain vulnerabilities exposed in recent years have accelerated reshoring efforts and created demand for redundant inventory positions. Companies that once operated with lean just-in-time inventory models are now maintaining larger safety stocks, directly translating to increased space requirements.
Automation Impact
While automation is changing how industrial spaces are utilized, it hasn’t reduced overall space demand. In fact, many automated systems require more cubic footage than traditional operations. Companies are using automation to increase throughput capacity rather than reduce their spatial footprint.
Port Investment
Significant investments in the Los Angeles and Long Beach port infrastructure are underway, which will increase cargo handling capacity and further cement the region’s importance as a logistics hub. These improvements will likely drive additional demand for supporting industrial space throughout the supply chain.
FAQs
What factors are influencing the industrial space demand forecast in LA’s CRE market?
The industrial space demand forecast in LA is primarily influenced by the growth of e-commerce, changes in supply chain logistics, and a rising need for distribution centers. The NAIOP reports highlight that these factors are leading to higher demand for industrial space.
How is the NAIOP industrial space demand forecast shaping investment decisions in 2025?
The NAIOP industrial space demand forecast for 2025 indicates a continued high demand for industrial real estate, prompting investors to focus on acquiring properties that align with the anticipated growth in the industrial sector.
What is the expected net absorption for industrial space in Los Angeles by 2025?
The industrial space demand forecast suggests that net absorption in Los Angeles could reach several million square feet by 2025, reflecting the ongoing trend of increasing tenant demand.
How does e-commerce impact rents for industrial space in LA?
The rise of e-commerce is driving up rents for industrial space, as companies seek to establish distribution centers closer to urban areas. This trend is reflected in the industrial market’s overall rent growth, which is above the national average.
What are the projections for industrial sales in the upcoming years?
The industrial sales forecast indicates a robust market, with predictions showing continued growth driven by high demand for industrial space and ongoing commercial real estate development in the sector.
Conclusion
The industrial market is evolving rapidly, creating both challenges and opportunities for businesses and investors alike. With strategic locations becoming increasingly scarce, now is the time to position yourself advantageously in this dynamic landscape.
Having navigated these waters for nearly two decades, I understand the pressure you’re feeling in this competitive market. Let’s connect for a no-obligation consultation to discuss your specific industrial space needs and create a strategy tailored to your business goals.
Your next move matters. Schedule a consultation today to secure your industrial space advantage.
