Updated July 31, 2026. Market data reflects Q2 2026 reporting and rate quotes as of late July 2026.

Southern California commercial real estate is in a genuinely mixed position right now. Lending activity has recovered to a five-year high, industrial leasing in the Inland Empire is up more than 40% year over year, and construction has fallen off a cliff. At the same time, asking rents are still falling, borrowing costs have risen since the spring, and the Inland Empire remains the softest of the region’s three major industrial markets.

Both halves of that are true. Here is where things actually stand, with every figure sourced.

Capital markets: cheaper than 2024, more expensive than February

The benchmark first. The 10-year Treasury closed at 4.68% on July 30, 2026. That is up from a February 2026 average near 4.13%, so anyone working off spring quotes is roughly half a point behind the market.

Two important things about the rates you see advertised. Lender and broker sites publish starting rates for the best-qualified borrower, and those are not what most deals close at. CBRE’s Lending Momentum Index tracks rates on loans that actually closed, and reports an average commercial mortgage rate of 5.7% in Q1 2026, down 110 basis points quarter over quarter, with agency loans at 5.4%. Closed-loan averages run below advertised tables. Ask your lender which number they are quoting you.

Current indicative ranges, as of late July 2026:

Agency multifamily (Fannie Mae, Freddie Mac): roughly 5.5% to 6.3% for standard 10-year fixed product
CMBS and conduit: roughly 6.4% to 8.2%
Industrial and office, bank or conduit: starting in the high 6s, commonly 6.8% to 8%
SBA 504: 6.17% effective on the 25-year, 6.20% on the 20-year from the July 2026 debenture pricing. These are set rates, not advertised ones, which makes them the most reliable figure on this page.

If you own owner-occupied industrial or flex, the SBA 504 rate is worth a hard look. At 6.17% fixed for 25 years it is currently pricing below most conventional quotes for the same asset.

Lending is back, and the money has changed hands

This is the most underappreciated story of 2026 so far.

The Mortgage Bankers Association reports commercial and multifamily borrowing up 52% year over year in Q1 2026. By property type the spread is wide: industrial up 56%, multifamily up 49%, retail up 148%, and office down 2%. The MBA also forecasts total originations reaching $805.5 billion in 2026, up 27% from 2025.

CBRE’s Lending Momentum Index hit 1.5 in Q1 2026, a five-year high, up from 0.3 a year earlier. But look at who is lending: alternative lenders now account for 53% of non-agency originations, up from 19% a year ago, while banks fell to 22% from 34% and CMBS to 8% from 26%.

For a borrower that matters practically. The capital is available, but increasingly it is not coming from the bank you have always used. If your renewal conversation is going badly, the market is wider than it looks.

Industrial: the correction is real, and the units matter

Southern California industrial is quoted per square foot per month, triple net. Any figure you see quoted annually needs dividing by twelve before you compare it to a local comp.

Inland Empire. Kidder Mathews reports $0.98/SF/month NNN for Q2 2026, down 4.85% year over year, at 7.6% direct vacancy. CBRE reports $1.08/SF/month NNN at 7.4% vacancy for its IE Core submarket. CoStar data prepared for the Riverside County Economic Development Agency puts market asking rents at $1.03/SF/month, roughly 23% below the 2023 peak and back at early 2022 levels.

Orange County. $1.45/SF/month NNN at 6.0% direct vacancy, down 5.2% year over year from $1.53.

Los Angeles. $1.37/SF/month NNN at 6.0% direct vacancy, down 6.16% year over year from $1.46.

The ranking is worth stating plainly. The Inland Empire is the softest of the three. Coastal owners in LA and Orange County have more pricing leverage than IE owners do. Advice that treats Southern California as a single market will mislead you.

Two signals pointing up

Leasing has come back hard. CBRE reports Q2 2026 Inland Empire leasing activity of 15.5 million square feet, up 41.7% from 10.9 million a year earlier. That is real demand returning, not a statistical artifact.

New supply has stopped. The IE construction pipeline shrank to 6.2 million square feet, 41.3% below year-ago levels. Space that is not being built now is space that will not compete with your building in 2027 and 2028.

Rising absorption against falling deliveries is the classic setup for stabilization. It has not reached asking rents yet, and it may not for several quarters, but it is the reason to be cautiously constructive rather than bearish.

Nationally, the National Association of Realtors put industrial vacancy at 7.6% in May 2026 with 122.7 million square feet of net absorption over twelve months. Retail remains the tightest major sector at 4.4% vacancy with the strongest rent growth at 2.0%. Office is still the weak spot at 13.9%.

Smaller space is holding up better

CoStar reported in June 2026 that nationally, availability for small-bay industrial runs at 6.4% against 10.9% for the broader logistics market. Small-footprint product competes in a different pool than big-box distribution.

Two caveats worth stating. Those are availability rates, which run above vacancy because they count space being marketed while still occupied. And they are national figures, while Inland Empire availability sits at 11.9%, above the national logistics number. The small-format pattern is real, but it does not automatically apply to your building. That takes a look at your actual competitive set.

Credit quality: watch office, not industrial

The CMBS delinquency rate fell 20 basis points to 7.35% in June 2026, though it remains 22 basis points above a year ago. The sector split is stark: office at 11.57% against industrial at 1.2%, with multifamily at 7.23%, retail at 6.91% and lodging at 5.22%.

Industrial credit performance is close to pristine. If you own industrial or flex and read alarming headlines about commercial real estate distress, those headlines are almost always about office.

The regulatory item on your 2026 calendar

California’s 2025 Building Energy Efficiency Standards, Title 24 Part 6, now apply. One detail is commonly misunderstood: compliance is triggered by the permit application date, not by occupancy or by the calendar. Buildings whose permit applications were filed on or after January 1, 2026 must comply.

For owners planning tenant improvements, that is a budget line worth confirming with your contractor before you commit to a TI allowance in a lease negotiation.

What we would tell an owner right now

Reprice against current deals, not 2023 comps. Asking rents are roughly 23% off peak in the Inland Empire, and concessions mean effective rents sit below asking. A pro forma built on 2022 or 2023 assumptions needs rebuilding.

Do not confuse asking with achieved. Several months of free rent is standard in the IE right now. Compare deals on effective rent or you will misjudge your position.

If you are refinancing, widen the lender list. Alternative lenders took share from banks in a way that changes who is likely to say yes. Owner-occupiers should price SBA 504 against conventional.

If you own small-bay or flex, you are in the better part of a soft market. Position accordingly, but verify it against your actual competitive set rather than assuming.

If you can wait, waiting has an argument. Falling construction and recovering leasing point toward stabilization. That is not a guarantee, and holding costs are real, but the supply picture in 2027 looks materially better than 2025.

Talk to our team about where your property sits against current comps, or see what we have on the market.

Frequently asked questions

Are Southern California industrial rents rising or falling?
Falling, though the rate of decline is slowing. Inland Empire asking rents are down about 4.85% year over year and roughly 23% from the 2023 peak. Los Angeles is down 6.16% and Orange County 5.2% year over year. Leasing volume, by contrast, is up sharply.

What are commercial loan rates right now?
As of late July 2026, agency multifamily runs roughly 5.5% to 6.3%, CMBS 6.4% to 8.2%, and industrial or office bank debt starts in the high 6s. SBA 504 is 6.17% on the 25-year. Note that CBRE’s data on loans that actually closed shows an average of 5.7%, below most advertised rates. Rates have risen since February, tracking the 10-year Treasury from about 4.13% to 4.68%.

Which Southern California market is strongest?
For industrial, Orange County and Los Angeles are both tighter than the Inland Empire at 6.0% direct vacancy against 7.6% to 8.7%. By sector nationally, retail is tightest at 4.4% vacancy and office weakest at 13.9%.

Is now a good time to buy commercial property in Southern California?
Entry pricing is meaningfully better than two years ago, and the supply pipeline supports a constructive medium-term view. But rents are still declining, and financing costs more than it did in the spring. The answer depends on your hold period, your leverage, and whether the specific asset has near-term rollover exposure. Anyone who answers this question without asking you those things is selling, not advising.

How does Title 24 affect my property?
The 2025 Energy Code applies to permit applications filed on or after January 1, 2026. Existing buildings are not required to retrofit, but tenant improvements and alterations requiring permits will need to meet the current standard. Budget for it in TI negotiations.

Sources

All industrial rents quoted per square foot per month, triple net, the standard convention in Southern California. Rate ranges are indicative and move daily; closed-loan averages differ from advertised rates. Figures vary between research firms because each defines market geography and building sets differently. Nothing here is a valuation, a lending commitment, or investment advice for any specific property.

Southern California CRE Market Update: Q2 2026