Cushman & Wakefield’s latest reports also show shifts in office use and higher than average vacancy rates
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The Southern California office leasing market represents many of the nationwide leasing and occupancy trends, although local markets each have unique dynamics.
“The overarching trend in Southern California is a structural shift in office utilization, with elevated vacancy levels persisting as tenants reassess their space needs,” said Jolanta Campion, brokerage firm Cushman & Wakefield’s research manager for Southern California.
Office Market: Nearing Equilibrium
Coastal office markets were impacted by the combination of shifting office usage spurred by the pandemic that was compounded by rising interest rates. Occupancy rates fell and construction slowed considerably. Over the next several years, the pace of office conversions and demolitions could surpass new construction.
Nevertheless, market fundamentals appear to be nearing a point of equilibrium. Data from Cushman & Wakefield shows that sublease space has dwindled. Office landlords recognize the need to improve amenities in order to attract the wide variety of companies throughout the region that include technology, entertainment, professional services, life sciences and others.
Regional Breakdowns
“Orange County is seeing a resurgence in occupier activity, particularly in the Greater Airport Area, while landlords prioritize preserving face rents through concession-heavy lease structures,” said Campion.
“San Diego, on the other hand, benefits from strong demand for high-quality spaces, led by technology tenants and a notable decline in sublease availability. Meanwhile, Los Angeles faces the highest vacancy rates in the region, driven by soft tenant demand and a shift toward flexible leasing. Despite these challenges, the market is adapting through office conversions, demolitions and a focus on quality over quantity in leasing activity.”
Industrial Market: Stabilizing Landscape
On the industrial side, the Southern California market’s brisk pace of activity has slowed to historical norms, but the asking rates are elevated above pre-pandemic levels while new construction has slightly outpaced demand. As a result, industrial vacancies are at their highest rates in a decade, but are still among the lowest in the nation.
“Across Southern California, the industrial market is experiencing an uneven but stabilizing landscape. Los Angeles stands out with a low vacancy rate of 4.6% and the region’s strongest net absorption, supported by resilient port activity and robust leasing, even as rent growth moderates,” said Campion. “In contrast, Orange County’s vacancy has risen to 5%, with leasing activity remaining selective and influenced by ongoing recalibration in logistics and manufacturing sectors.”
Looking Ahead to 2026
Heading into 2026, ongoing tariff volatility, particularly involving China, which is the country’s largest trade partner, continues to create uncertainty and episodic fluctuations in cargo volumes. Port activity surged in the first eight months of 2025 as shippers front-loaded cargo ahead of anticipated tariff deadlines. Large warehouse occupiers continue to make long-term plans, but short-term volatility is impacting both new leasing and renewals.
LOS ANGELES COUNTY
Los Angeles Office Market: High Vacancy, Premium Rents
The Los Angeles office market vacancy rate was 23.4%, but a slowdown in leasing activity led to the lowest volume of gross leasing activity since 2020. Market-wide asking rents moved up to $3.59 per square foot per month on a full-service gross basis. In West Los Angeles, the overall asking rate was $5.10 per square foot per month for Class A space. Major transactions include Hallmark Media, which secured 60,877 square feet in Burbank and will relocate from its longtime headquarters in Studio City.
Industrial Market: Positive Absorption Returns
On the industrial side, vacancies held steady at 4.6%. Despite elevated vacancy, net absorption turned positive on an annual basis for the first time since 2022. Rents have softened and fell for the ninth consecutive quarter to $1.33 per square foot per month on a triple-net basis. However, rates were 47.5% higher compared with pre-pandemic rates.
LA County Office Market
LA County Industrial Market
ORANGE COUNTY
Orange County Office Market: Flight to Quality
The overall office market vacancy held steady at 18.3% while the average asking rate increased quarter over quarter, but declined slightly on an annual basis to $2.88 per square foot per month. Over the past 12 months, average Class A and Class B rents remained unchanged at $3.12 per square foot and $2.50 per square foot respectively.
Class A properties dominate demand, capturing 60% of new leasing as tenants prioritized higher-quality, amenity-rich environments. Office conversions and demolitions continue—since 2023, approximately 2.0 million square feet of office inventory has been removed.
Industrial Market: Construction Slows, Absorption Turns Positive
The industrial vacancy rate increased for the 12th consecutive quarter, rising by 10 basis points quarter-over-quarter to 5.0%. However, there was a bright spot as net absorption turned positive for the first time in eight quarters.
There is little pressure from new supply. There were just 15 industrial buildings totaling 1.7 million square feet under construction across Orange County. Four buildings, representing approximately 30% of the square footage under construction, had secured pre-leasing commitments.
OC Office Market
OC Industrial Market
INLAND EMPIRE
Inland Empire Industrial: Vacancy Rises Above 10-Year Average
The overall industrial vacancy rate increased to 8.1%, rising 60 basis points quarter over quarter and remaining well above the 10-year annual average of 4.0%. The gap between landlord and tenant expectations continues to challenge leasing activity, while heightened operating expenses add another layer of complexity.
Even as asking rents soften, total occupancy costs remain high due to insurance, taxes and utilities, prompting some occupiers to downsize or consolidate operations. Larger occupiers are increasingly exploring secondary and tertiary markets outside the Inland Empire to manage costs and create broader footprint diversification.
Office Market: Driven by Affordability
The office vacancy rate in the Inland Empire increased quarter over quarter to 8.7%. Leasing demand is expected to remain steady, supported by healthcare, government and professional services tenants seeking small to midsize spaces.
That supports an asking rate of $2.24 per square foot per month, which has held steady in a narrow range for the past two years. Affordability is a key driver of the market, which is heavily focused on government, health care, education and professional services.
IE Office Market
IE Industrial Market
SAN DIEGO
San Diego Office Market: Tech Sector Leads Leasing
The countywide average overall asking rent across all classes softened modestly, declining 1.4% year over year to $3.39 per square foot on a monthly full-service basis. Tenant behavior continues to evolve as occupiers balance hybrid work policies with changing business needs.
By industry, technology tenants led activity, accounting for 52% of new leasing, followed by legal services, professional and business services, and energy. The only major project under construction is the Campus at Horton, which will deliver 243,000 square feet in 2026. There are an additional 14.4 million square feet proposed, but financing constraints and economic uncertainty are impediments to projects without pre-leasing.
Industrial Market: Otay Mesa Leads Activity
San Diego’s overall vacancy rate fell to 7.2% quarter over quarter as there was a second consecutive quarter of positive net absorption following a slower start to the year. Annual leasing volume reached 5.6 million square feet.
Transportation, warehousing and utilities, along with manufacturing, remained the most active sectors in 2025, accounting for 24% and 20% of leasing volume, respectively. Wholesale trade and defense followed, each capturing 10%. Otay Mesa led leasing activity with a 26% share followed by Carlsbad and Vista at 12% each.
SD Office Market
SD Industrial Market
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