Southern California Commercial Real Estate Splits Into Four Different Markets
-
Click here to listen to this article - Share via
For commercial real estate brokers, developers and investors, cyclical market trends have deviated, which has led to changing approaches for industrial, retail, office and multifamily property landlords and tenants.
“The biggest trend we’re seeing is that commercial real estate can no longer be viewed as one market. Industrial, multifamily, retail and office are all behaving differently, and even within those sectors, performance can change dramatically from one Southern California submarket to another,” said Meny Atias, operating principal of KW Commercial SoCal. The company is one of the fastest growing in Southern California and now has about 60 commercial real estate associates serving the greater Los Angeles market.
Industrial real estate had a significant bump following the onset of the pandemic that continued demand growth from e-commerce. Logistics companies have pulled back slightly over the past couple of years, but the Southern California market has buoyed that activity with momentum from the expanding aerospace and defense sector.
Firms such as CREA, an El Segundo-based firm that represents tenants in the hard tech, life sciences, food and beverage and entertainment industries in Southern California, plan to open an Orange County office to support the hard tech sector. The company was founded in 2023 by industry veterans Ted Simpson and Erik Stiebel.
The industrial market has deviated considerably from the office market, which is starting to improve as tenants make long-term commitments, even if those require a little bit extra incentive from landlords. Brokerage firm Cushman & Wakefield analyzed 220 office tenant relocations in Orange County from 2024 through mid-2026, and research demonstrated that tenants took advantage of elevated vacancy and favorable lease economics to upgrade space, adjust footprints and secure stronger deal terms.
“Many of these moves are not driven by rent alone. Tenants are upgrading buildings, refining their footprints and capturing stronger concession packages,” said Jolanta Campion, Southern California research director for Cushman & Wakefield.
While office tenants are using the current market environment to upgrade, interest rates have impacted pricing and activity for multifamily buyers and sellers. Retail has also been challenging for mall owners and other strip centers that can no longer rely on anchor tenants to drive foot traffic.
“Southern California commercial real estate continues to be a market of both challenges and significant opportunity. Higher interest rates have certainly affected transaction volume and changed how deals are structured, but we are also seeing buyers, sellers and investors becoming more realistic and adapting to the new environment,” said KW Commercial SoCal’s Atias. “Asset quality, location, cash flow and the ability to create long-term value matter more than ever.”
