The commercial real estate environment is continually improving in California as our economy has finally entered a period of expansion.

Jobs surpassed their peak pre-recession level in 2014 and the rate of new employment is exceeding the hot pace of the late 1990s, with upwards of 70,000 new jobs added each month in California. All this employment is increasing demand for office space, apartments and eventually (but not quite yet) retail space. Once the employment market reaches a full post-population growth recovery — likely in 2019 — expect the commercial real estate market to be fully recovered.

As residents’ wallets become full once more, the retail industry continues to recover at a cautious, but steady pace in 2016.

Vacant commercial property was mostly down across the state, a good sign for future construction and prices. Once vacancies fall on demand for more space, prices will rise more quickly and builders and their lenders will seize the opportunity to begin new construction.

Absorption — the amount of space becoming occupied each quarter — was positive across Southern California markets, after mixed absorption experienced in the previous quarter.

How did your region fare? Industrial, office and retail are covered across the following regions, courtesy of Voit Real Estate Services:

  • the Inland Empire;
  • Los Angeles;
  • Orange County; and
  • San Diego.

Check out the details that follow, or visit Voit for even more specifics (you’ll need to sign up for a free Voit account to access their data).

Inland Empire

The Inland Empire’s commercial market is defined by its sprawling industrial buildings, by far its largest commercial sector. Burgeoning construction activity is promising in the third quarter (Q3) of 2016, with 18.6 million square feet of industrial space under construction in the Inland Empire.

Though office market data is unavailable for Q3 2016, the Inland Empire’s office market has been struggling through its slow recovery, with a high vacancy rate (soon to be remedied due to low levels of construction) and a sluggish absorption rate.




Los Angeles has one of the lowest industrial vacancy rates in the nation, at just under 2%. It’s a good time to own industrial space in Los Angeles, as vacancies are down and lease rates are up.




The industrial sector is heading into a period of expansion in Orange County. The industrial vacancy rate was at 2.3% in Q3 2016, up slightly from an all-time low experienced in late 2015. Today’s low vacancy rate is soon to be countered by high levels of construction.

While not as recovered as Orange County’s other commercial markets, the office real estate market mostly improved in Q3 2016, and new construction is expected to pick up in the coming year.



San Diego’s industrial market continued at a solid pace in the third quarter (Q3) of 2016, with a low vacancy rate and a steady flow of new construction.

The office market is not quite recovered, as vacancies remain somewhat high and thus construction and sale and lease transactions remain low.

Expect to see more new construction of retail space in the coming quarters, as today’s low vacancy rate and low level of construction is a recipe for higher rents, and builders will undoubtedly notice.