Economy
Inland Empire (IE) nonfarm employment grew by 12,700 jobs, or 0.7% year-over-year (YOY), between August 2025 and August 2026. By industry, the largest job gains occurred in the private education and health services sector, adding 17,900 jobs annually, a 5.2% increase. The trade, transportation and utilities sector followed, adding 5,900 jobs during the same period, up 1.3% YOY. Conversely, the professional and business services sector recorded the largest job losses, shedding 5,700 jobs, down 3.6% YOY. Despite gains in nonfarm payroll employment, civilian employment declined by 31,400 workers YOY, while the labor force contracted by 39,200. The resulting decline in unemployed residents helped lower the unemployment rate from 6.2% in August 2025 to 5.9% in August 2026. However, the rate remained above the quarterly average of 5.2%.¹ Looking ahead, employment growth is expected to remain positive but moderate, with total employment projected to increase by 1.6% in 2027, below the region's five-year historical average of 2.5%.²
Port activity at the Ports of Los Angeles (LA) and Long Beach, key indicator of industrial demand, remained resilient through August 2026, with combined cargo volumes slightly outperforming last year's levels by 1.4%. In August 2026, the Port of LA processed 955,907 twenty-foot equivalent units (TEUs), down 0.3% YOY, while the Port of Long Beach handled 919,992 TEUs, up 2.0% YOY. Year-to-date (YTD) volumes also posted modest gains, with LA up 1.5% YOY to 7.0 million TEUs and Long Beach up 1.3% YOY to 6.7million TEUs.³ These totals suggest cargo volumes are stabilizing following elevated import activity in 2025 amid tariff uncertainty. While port operations remain efficient, with no major congestion reported, higher fuel costs, tariffs and other economic pressures continue to weigh on the outlook.
Supply And Demand
The overall vacancy rate in the IE declined to 8.0% in Q3 2026, down 50 basis points (bps) quarter-over-quarter (QOQ). Quarterly net absorption rebounded, supported by tenant move-ins following increased leasing activity in Q2. As a result, net absorption totaled 3.9 million square feet (msf) in Q3 2026. However, occupancy losses of 2.8 msf during the first half of the year limited YTD absorption to 1.1 msf. Despite lower vacancy, the availability rate continued to rise, reflecting more vacant and occupied space being marketed for lease. In Q3 2026, the availability rate reached 12.8%, up 100 bps QOQ, with 83.6 msf of space available across the
market. Direct availability increased by 4.7 msf during the quarter, while sublease availability grew by 1.7 msf. Eight new listings of 500,000 square feet (sf) or more contributed 6.3 msf to the increase in available space.
By submarket, IE East (IEE) posted a vacancy rate of 10.2%, down 60 bps QOQ, supported by notable occupancy gains. The IEE registered the quarter's largest move-in, with DP World Tech US occupying a 1.3-msf warehouse in Moreno Valley. The submarket recorded 1.8 msf of positive net absorption in Q3 2026, bringing YTD net absorption to 520,902 sf. In IE West (IEW), the vacancy rate also declined by 60 bps QOQ to 6.5%. The submarket led the region in quarterly net absorption at 2.3 msf. However, occupancy losses of 2.1 msf in Q1 2026 limited YTD net absorption to 495,852 sf. IE South (IES) recorded a vacancy rate of 4.7%, the lowest in the region, although it increased by 60 bps QOQ. The increase was largely attributable to two tenants vacating warehouses exceeding 100,000 sf each. Net absorption remained modestly positive YTD at 71,741 sf, but the move-outs had a disproportionate impact on vacancy given the submarket's relatively small inventory base.
Following a strong second quarter, new leasing activity slowed in Q3 2026. During the quarter, the IE recorded 9.2 msf of new leasing activity across 118 deals, down 45.4% QOQ and 19.4% YOY. Nevertheless, YTD activity reached 38.8 msf across 369 deals, up 16.9% YOY, supported by several big-box transactions, including multiple leases of approximately 1.0 msf or more. The IEW led the region with 21.4 msf across 237 deals, accounting for approximately 55% of total activity, followed by the IEE with 16.1 msf across 92 deals. By size range, buildings of 500,000 sf and larger accounted for 35% of YTD activity, followed by buildings ranging from 100,000 sf to 249,000 sf at 22%.
Future Inventory
Construction activity increased modestly QOQ, with 2.0 msf of new deliveries and 5.9 msf across 18 projects remaining under construction as of Q3 2026. However, the construction pipeline has contracted significantly from its 2022 peak of 40.6 msf. The reduced development pipeline is expected to support more balanced market conditions over the next 12 months as new supply diminishes, and absorption moves closer to historical norms.
Pricing
The overall average asking rent declined by 2.6% QOQ and 9.9% YOY to $1.01 per square foot (psf) per month on a triple-net basis. Direct asking rent averaged $1.03 psf, down 2.8% QOQ and 11.1% YOY, while sublease asking rent averaged $0.92 psf. By submarket, the IEW commanded the highest average asking rent at $1.13 psf, followed by the IES at $1.10 psf and the IEE at $0.92 psf, reflecting differences in location, product quality, building size and tenant demand.
