How Industrial Market Resets, Tenant Behavior, and Strategic Networking Shape CRE Success
Based on CRE Secrets Episode 145: “How Industrial Rents Tripled…Then Collapsed”
Industrial rents in Southern California tripled in just 18 months, then stalled, leaving owners, tenants, and brokers scrambling to make sense of a brutal market reset.
In this episode of Commercial Real Estate Secrets, Aviva Sonenreich sits down with veteran industrial broker and author Allen C. Buchanan to unpack what really happened in the Inland Empire and across the Southern California logistics belt. While Allen draws on his experience in Southern California, the lessons he shares are relevant for industrial markets across the U.S.
Problem: The Southern California Industrial Market Reset
The Southern California industrial market experienced a dramatic rollercoaster:
- During the COVID-19 surge, rents in the Inland Empire jumped from approximately $0.65 per sq. ft. to $1.95 per sq. ft. per month.
- E-commerce growth and third-party logistics demand rapidly absorbed nearly all available inventory, creating intense competition for tenants.
- By mid-2022, developers delivered new industrial buildings just as demand softened, fueled by rising interest rates, tariffs, and inflation.
Tenants with strong credit began securing concessions—months of free rent, reduced escalations, or flexible occupancy terms—while owners recalibrated expectations.
Key takeaway: This is not unique to California. Industrial markets nationwide face fluctuating rents, oversupply, and evolving tenant needs.
Solution: Education, Data, and Strategic Networking
1. Let the Market Be the “Bad Guy”
- Use objective data and comparable leases to educate owners on realistic expectations.
2. Track Key Metrics
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Monitor inventory turnover, lease expirations, and submarket trends to anticipate opportunities and risks.
3. Strategic Networking
- Build relationships with indirect contacts—CPAs, attorneys, bankers, and insurance agents—who influence tenants.
4. Educate, Advise, and Adapt
- For owners: Show real transaction data to illustrate rents and concessions.
- For tenants: Emphasize operating costs, flexibility, and third-party logistics solutions.
- Second-generation industrial space: 10–15-year-old buildings compete with Class A at lower operating costs, providing functional, affordable options.
Proof: Market Trends & Real-World Results
Allen shares concrete examples from the Inland Empire and surrounding Southern California industrial belt:
- Vacancy & rents: Rents currently hover around $0.85–$0.90 per square foot, down from COVID peaks but still slightly above pre-COVID levels in some submarkets.
- Second-generation industrial: Buildings 10+ years old with modern features (ESFR sprinklers, 30-ft clearance, 180-ft truck courts) compete with Class A space at lower operating costs, attracting cost-conscious tenants.
- Regulatory constraints: AB98 limits new industrial construction near residential areas, creating finite supply and long-term opportunity for stabilized properties.
- Strategic networking impact: Buchanan’s combination of indirect outreach and social media marketing has driven consistent deal flow and career success, even in soft markets.
Action: Apply CRE Best Practices Everywhere
Allen’s advice extends beyond Southern California:
- Let the market be the “bad guy”: Use data to educate owners and tenants instead of trying to convince them subjectively.
- Understand tenant cost pressures: Rent and labor drive decision-making—know what tenants can sustain.
- Evaluate second-generation space: It may be just as effective as Class A space for many users.
- Invest in strategic networking: Build relationships with indirect contacts—CPAs, attorneys, bankers, and insurance agents—who connect you to your target clients.
Follow The Sequence: A career blueprint emphasizing sourcing, evaluating, qualifying, controlling, executing, negotiating, commissioning, and expanding your CRE wins.
These practices create long-term client relationships, repeat business, and resilience during market resets, whether you operate in Southern California, Denver, or any industrial market nationwide.
Q1: Why did Southern California industrial rents spike and collapse?
A1: Rents surged due to e-commerce and third-party logistics demand, then fell as new buildings came online amid rising rates, inflation, and softened demand.
A1: Rents surged due to e-commerce and third-party logistics demand, then fell as new buildings came online amid rising rates, inflation, and softened demand.
Q2: What is strategic networking in CRE?
A2: Building relationships with indirect contacts, CPAs, attorneys, bankers, and insurance agents, who influence tenants, increasing deal opportunities and career growth.
A2: Building relationships with indirect contacts, CPAs, attorneys, bankers, and insurance agents, who influence tenants, increasing deal opportunities and career growth.
Q3: How can brokers help owners during market resets?
A3: By using objective market data and comparable leases to set realistic expectations and guide decisions on concessions and lease flexibility.
A3: By using objective market data and comparable leases to set realistic expectations and guide decisions on concessions and lease flexibility.
Q4: What is second-generation industrial space?
A4: Buildings 10–15 years old with modern features that compete with Class A space at lower costs, offering tenants functional and affordable alternatives.
A4: Buildings 10–15 years old with modern features that compete with Class A space at lower costs, offering tenants functional and affordable alternatives.
Q5: What is “The Sequence” in CRE?
A5: A career blueprint covering sourcing, evaluating, qualifying, controlling, executing, negotiating, commissioning, and expanding deals to achieve sustainable success.
A5: A career blueprint covering sourcing, evaluating, qualifying, controlling, executing, negotiating, commissioning, and expanding deals to achieve sustainable success.
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🎧 Listen to the full conversation with Allen C. Buchanan, veteran Southern California industrial broker and author, to unpack what really happened in the Inland Empire and across the Southern California logistics belt—and what it means for owners, tenants, and brokers today
