The Industrial Gold Rush Slows: Why Class A Logistics Development in Southern California Is at a Crossroads

If you’ve driven through the Inland Empire lately, you’ve likely noticed the seemingly endless stretch of massive warehouses sprouting up like weeds after a rainy season. These aren’t your grandfather’s industrial buildings—these are Class A logistics facilities, the gold standard of modern warehousing.
 
But what exactly defines a Class A logistics building, and why has Southern California been ground zero for their development?
 
What Makes a Logistics Building “Class A”?
In commercial real estate, “Class A” is the best of the best. For logistics buildings, that means high ceilings (32 to 40 feet clear height), wide column spacing, expansive truck courts, and an abundance of dock doors. These facilities are designed for maximum efficiency, helping retailers and logistics companies move goods as quickly as possible.
 
Modern Class A warehouses also feature state-of-the-art technology, including automation, robotics, and advanced climate control for specialized storage needs.
 
Sustainability has also become a priority, with many new projects incorporating LEED certification, solar panels, and EV infrastructure to meet California’s stringent environmental regulations.
 
Why Has Southern California Been a Logistics Boomtown?
Southern California has long been a logistics hub, but in recent years, industrial development has reached unprecedented levels, particularly in the Inland Empire. The reasons have been as clear as a truck’s route on a traffic-free I-10 (if only that ever existed).
 
First and foremost, the Ports of Los Angeles and Long Beach handle nearly 40% of U.S. imports, making the region a critical entry point for goods from Asia. Companies have historically needed distribution centers close to these ports to move inventory quickly, reducing supply chain costs and delivery times.
 
The rise of e-commerce further accelerated demand. Consumers now expect next-day or even same-day delivery, requiring strategically located fulfillment centers. Major players like Amazon, Walmart, and FedEx aggressively expanded their logistics footprint to keep pace.
At its peak, the Inland Empire was a developer’s dream—land was more affordable than in Los Angeles or Orange County, and proximity to major transportation corridors made it an ideal distribution hub. Vacancy rates were historically low, and new warehouses were often leased before construction was even completed.
 
A Market Shift: From Undersupply to Oversupply
But what was once a perfect storm of demand has now flipped on its head. Since mid-2022, the market has cooled significantly, and supply has now outpaced demand.
 
Massive speculative development, combined with a post-pandemic slowdown in e-commerce growth and shifting inventory strategies, has led to a glut of new industrial inventory—especially in the Inland Empire. The frenzied leasing activity of 2020-2022 has slowed, leaving many newly constructed warehouses sitting empty.
 
The impact? Rents have begun to soften, and landlords are increasingly offering concessions—free rent, tenant improvement allowances, and flexible lease terms—to spur absorption. It’s a stark contrast to just a couple of years ago when landlords held all the leverage.
 
The Investment appetite Adjusts
Institutional investors, once bullish on Southern California’s industrial sector, are now treading more cautiously. Rising interest rates have further complicated the picture, making development financing more expensive and prompting some developers to hit pause on new projects.
 
Still, despite the current correction, Southern California remains one of the most critical logistics markets in the world. As long as goods continue flowing through its ports, the region will be a key player in global trade. The question is whether landlords, developers, and investors can adjust to a new reality—one where growth isn’t limitless, and strategic leasing efforts will be just as important as new construction.
 
The Road Ahead
So, what’s next? The market is recalibrating, and 2024 will be a year of absorption rather than expansion. Developers and investors who were riding the wave of relentless demand will now need to focus on filling vacancies, managing rental expectations, and offering incentives to attract tenants.
For communities, that means fewer new projects breaking ground—but also a more balanced industrial market that could lead to more sustainable long-term growth.
One thing’s for sure—those massive warehouses aren’t going anywhere. But for the first time in years, some of them might be sitting empty a little longer than expected.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.