Commercial real estate markets throughout the region showed varying states of growth or stall in Q3, according to data from Cushman & Wakefield – the Southern California office leasing market had higher levels of activity in Q3 of 2025 compared with the first half of the year

In Los Angeles, deals were concentrated in the South Bay. Several large subleases indicated that companies were looking to expand but were also opportunistic, taking advantage of plug-and-play options offering flexibility and cost efficiency. Entertainment software developer COSM and space vehicle manufacturer Varda Space Industries subleased 67,725 square feet and 54,479 square feet, respectively, from space occupied by Beyond Meat in El Segundo. Canvas Worldwide signed a deal to relocate from The Collective in Playa Vista for a 68,301-square-foot sublease in El Segundo. Professional services firm KPMG downsized to a more efficient 64,200 square foot office in Downtown Los Angeles while concurrently leasing 49,903 square feet at Continental Park in El Segundo.

In a quirk that may indicate a short-term lull in the industrial market, there were no new warehouse projects that broke ground in the Inland Empire during the quarter. That marks the first time in 20 years that the region has had no new construction starts during an individual quarter.

“It’s not a long-term situation. We’re already seeing developers break ground on sites,” said Mike McCrary, vice chairman at JLL. “We built too much too quickly and we’re at a point where we have corrected and we are now moving towards a balanced equilibrium around development.”

There was a post-pandemic construction boom for the Inland Empire, which added 100 million square feet of warehouse space since the beginning of 2021. At the end of the third quarter, there were 4.9 million square feet under construction. The high cost of construction due to labor and material costs, along with a vacancy rate above recent historical averages coupled with uncertainty regarding economic factors, contributed to the temporary pause. The Inland Empire industrial vacancy rate climbed to 7.8% and the availability rate, which measures space that is occupied but may become vacant in the future, jumped to 11.5%.

As a result of the industrial slowdown, asking rates dropped for ten consecutive quarters in the Inland Empire and the $1.16 per square foot per month asking rate is down 9.4% year over year. In Los Angeles, asking rates fell for eight straight quarters. Nevertheless, long-term growth tells a different story. Compared to pre-COVID-19 levels in Q4 2019, average rents have grown by 48.5% in Los Angeles.

Tenants that signed leases of five or more years ago are encountering significant rent spikes, all leading to sticker shock and complex lease negotiations.

-David Nusbaum