The Window Is Open — But It Won’t Stay That Way
What every owner of sub-100,000 SF industrial space in the Inland Empire needs to understand right now.
For the better part of two years, industrial landlords across the Inland Empire enjoyed a market that almost ran itself. Rents were climbing, tenants were scrambling, and vacancy was so tight that even an older vintage building could command top dollar. That cycle is over. What’s here now is something more nuanced — and for owners in the sub-100,000 SF segment, more interesting than the headlines suggest.
The broad-market correction you’ve been reading about is real. Overall IE vacancy has climbed to the 8–9% range, well above the 10-year average of 4%. Asking rents have fallen more than 30% from their 2023 peak. Sublease space now represents roughly 20% of available inventory, putting additional downward pressure on face rents and pushing landlords to offer concessions they hadn’t contemplated two years ago.
But here’s what those aggregate numbers obscure: virtually all of that distress lives in big-box product. The 500,000 SF spec buildings. The million-square-foot logistics palaces sitting vacant in Hesperia and San Bernardino. That is not your asset.
Small Bay Is a Different Market
Nationally, vacancy for industrial properties under 50,000 SF sits around 3.4% — less than half the overall market rate. In the Inland Empire, the dynamic is similar. While institutional developers flooded the market with big-box speculative product over the last three years, almost no one built meaningful new inventory in the sub-100K segment. The result is a supply base that is aging, constrained by land costs and entitlement friction, and nearly impossible to replicate at current economics.
Your tenants — contractors, distributors, light manufacturers, last-mile operators, e-commerce fulfillment shops — are not going anywhere. They don’t need 40-foot clear heights or cross-dock configurations. They need functional, affordable space with reasonable truck access close to the labor pool and the population centers. That’s what you’re providing. The new construction pipeline has nothing to offer that serves them at your rent basis.
What the Data Actually Says
The Inland Empire closed 2025 with overall average asking rents around $1.14 PSF NNN per month, down roughly 10–11% year-over-year from already-corrected levels. Development activity hit a 15-year low in Q4 2025, with just 2.4 million SF under construction across the entire region — a fraction of the 39.8 million SF that was under construction at the 2022 peak. New groundbreakings have been negligible.
That construction famine will matter. The pipeline that creates your future competition is not being replenished. And while the broader market works through its big-box oversupply, the expectation across most major research shops is that the IE stabilizes through 2026 and begins recovering in 2027 as absorption catches up with the depleted supply pipeline.
For smaller product, rents have shown considerably more stickiness than large-bay equivalents. One Q3 2025 market report noted “stickier premiums in small-bay parks” even as the broader market corrected. That’s not an accident. It reflects structural scarcity.
The Tenant Conversation Is Shifting
Here’s where owners need to pay attention. Your tenants are reading the same headlines you are. They know the broad market has softened. They know concessions are being offered. They may not fully understand the distinction between the big-box correction and the small-bay reality — but some of them do, and they will use the market narrative as a negotiating lever at renewal time whether or not it accurately describes your specific asset.
The antidote is getting in front of lease expirations early and with data. Know what your sub-market is actually trading at — not the blended IE average, but functionally comparable product in your specific corridor. Know your replacement cost. Know where your rents sit relative to the few genuinely comparable options available to your tenant. If you walk into a renewal negotiation armed with that information, you can hold the line.
What to Do Right Now
A few concrete priorities for owners in this segment:
1. Audit your lease expirations for the next 24 months. Any lease coming due in 2026–2027 should be on your radar now. The window to renew on favorable terms — before the broader market recovers and your tenants lose their negotiating leverage — may actually be narrower than it appears.
2. Know your true submarket comps, not the blended averages. The difference between what’s happening in Ontario versus Redlands versus Perris is significant. Aggregate IE data will mislead you in either direction.
3. Maintain your asset. Tenants who have options will move to better product if your building is tired. In the sub-100K segment, functional condition and deferred maintenance matter more than they did when tenants had no choice.
4. Resist the temptation to chase bad comps. A big-box landlord offering 6 months of free rent to fill 500,000 SF is not your competition. Don’t let their comps set your pricing floor.
The IE industrial market correction is real, but it is not uniform. The softness is concentrated in exactly the product segment you don’t own. Your segment — functional, mid-size, IE-located industrial — remains undersupplied, under-built, and durable in its demand base. The owners who understand that distinction and manage accordingly will look back on this period as an opportunity. The ones who react to the headlines without that nuance risk leaving value on the table or, worse, losing tenants they didn’t need to lose.
The window is open. Use it.