Stable Interest Rates and Resilient Consumer Drives Southern California Industrial Growth

Stability in interest rates is helping drive growth in industrial investment volume in some of Southern California's biggest markets – Los Angeles, Orange County, the Inland Empire and San Diego, according to a report from JLL.

Capital markets are poised to accelerate further in 2026. While some funds may still be over-allocated, others have begun surveying the market for opportunities to access SoCal, JLL reported.

Debt financing for construction, even spec build projects, indicates long-term confidence in this gateway region.

In one asset class, Asian third-party logistics leasing in Southern California industrial buildings does not appear to be a "flash in the pan/tariff-front running" only type of demand.

These operators continue to stay in the market, looking for space and showing increased sophistication, according to David Fan, JLL's senior director of Southern California research, speaking to various trends in the report.

He tells GlobeSt.com that good manufacturers can set up their own logistics subsidiaries to reduce distribution costs, while consumers continue to buy from them and want fast shipping.

Additionally, aerospace/defense funding continues to pour into the region, making it a significant industry driver.

"The speed and magnitude of funding for aerospace and defense this year have been impressive – even before the potential mega-IPO of SpaceX," Fan said.

Overall, Fan said that all this new funding "can accelerate the ecosystem's activation here, particularly in LA's South Bay submarket and Orange County."

"We continue to find consumers to be so resilient in the face of uncertainties (tariffs and a slower job market last year) – giving companies the confidence to sign leases," Fan said.

Meanwhile, absorption in SoCal was up for the first time since 2022, with pockets of strength across many markets and current development across SoCal accounts for less than 1% of the inventory.