Why this matters: Commercial vacancy rates rose after 2023 and continue to rise in Southern California. While increasing vacancies cut into rental income and leasing fees, the absorption rate is worsening and shifting the source of leasing fees. Regions with the highest vacancy rates see the most occupancy of vacant space.
Landlords need to retain tenants in 2025
The fourth quarter (Q4) 2024 reports on the Southern California (SoCal) commercial property market are in, courtesy of VOIT Real Estate Services.
SoCal’s commercial market finished the year with high-priced space remaining vacant and tenants going for choices at lower rates by relocating to inland areas experiencing higher vacancy rates. Leasing agents are getting the message as their income is affected.
Vacancy rates, the percentage of a building’s space available for rent, are heading higher; absorption rates of vacant space are lower than the pace of increase in vacating tenants and some additional construction inventory. This is the condition in all regions in SoCal, except for the Inland Empire, as reported by VOIT — San Diego, Orange County, Los Angeles and the Inland Empire.
Landlords now offer tenant concessions to attract tenants to their vacant industrial, office and retail buildings.
Net absorption is the term used for the change in the quantity of occupied square footage of space from quarter to quarter. It is more suggestive of leasing fees than anything to do with vacancy levels.
In 2024, Q3 to Q4 net absorption for industrial worsened in SoCal except in the Inland Empire where vacancy rates are the highest. The only regions and markets in positive territory for the year of 2024 are San Diego office and Inland Empire industrial. However, all SoCal markets are in fluctuation and far from stable.
Tenant brokers in 2025 need to consider negotiating fees and representation agreements with their tenant-clients. The goal for tenant brokers is to avoid liability for continuing the fee-fixing arrangement in commercial leasing, which state code ended in commercial property sales. The code excludes the owner of property and their broker from fee negotiations.
Realty Publications, Inc. (RPI) is releasing a tenant representation agreement form in the coming weeks. Brokers need to comply with the anti-trust laws of California which put an end to fee fixing funded by purchase prices and rent payments. Keep tuned to the firsttuesday Journal to download the forms as they become available.
San Diego County — industrial, retail and office
San Diego County’s industrial vacancy rate is:
- 6.55% in Q4 2024;
- up from 5.98% in Q3 2024; and
- up from 4.59% in Q4 2023.
San Diego County’s retail vacancy rate is:
- 4.06% in Q4 2024;
- down from 4.20% in Q3 2024; and
- up from 3.93% in Q4 2023.
San Diego County’s office vacancy rate is:
- 12.82% in Q4 2024;
- down from 12.94% in Q3 2024; and
- up from 11.70% in Q4 2023.
San Diego County’s industrial net absorption rate is:
- a shortfall of -248,937 square feet in Q4 2024;
- worsened from -154,355 square feet in Q3 2024; and
- improved from -395,256 square feet in Q4 2023.
San Diego County’s retail net absorption rate is:
- 197,082 square feet in Q4 2024;
- up from 99,547 square feet in Q3 2024; and
- up slightly from 178,741 square feet in Q4 2023.
San Diego County’s office net absorption rate is:
- 76,937 square feet in Q4 2024;
- up slightly from 60,180 square feet in Q3 2024; and
- down significantly from 323,859 square feet in Q4 2023.
Orange County — industrial and office
Orange County’s industrial vacancy rate is:
- 5.09% in Q4 2024;
- up from 4.40% in Q3 2024; and
- up double from 2.57% in Q4 2023.
Orange County’s office vacancy rate is:
- 16.07% in Q4 2024;
- flat with 16.10% in Q3 2024; and
- down from 17.27% in Q4 2023.
Orange County’s industrial net absorption rate is:
- a shortfall of -1,042,116 square feet in Q4 2024;
- worsened double-plus from -481,755 square feet in Q3 2024; and
- worsened significantly from -61,967 square feet in Q4 2023.
The annual loss in occupied space for the year 2024 in Orange County’s industrial market surpassed 2.6 million square feet.
Orange County’s office net absorption rate is:
- -47,400 square feet in Q4 2024;
- worsened from +33,181 square feet in Q3 2024; and
- worsened significantly from +366,886 square feet in Q4 2023.
Los Angeles — industrial
Los Angeles County’s industrial vacancy rate is:
- 5.58% in Q4 2024;
- up from 5.29% in Q3 2024; and
- up from 3.77% in Q4 2023.
Los Angeles County’s industrial net absorption rate is:
- -815,292 square feet in Q4 2024;
- worsened somewhat from -778,339 square feet in Q3 2024; and
- worsened by double from -414,935 square feet in Q4 2023.
Inland Empire — industrial
The Inland Empire’s industrial vacancy rate is:
- 7.09% in Q4 2024;
- down from 7.71% in Q3 2024; and
- up significantly from 4.87% in Q4 2023.
The Inland Empire’s industrial net absorption rate is:
- 3,166,696 square feet in Q4 2024;
- up significantly from 1,227,370 square feet in Q3 2024; and
- up from 1,320,786 square feet in Q4 2023.
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