How the IE Stacks Up to Other Major U.S. Markets

From 2023 to the present, consumer behavior has drifted toward pre-2020 norms, and the demand for industrial space has also reversed due to the slowing of imports coming into the United States. When compared to the nation, the Inland Empire has shifted from being one of the tightest industrial markets in the country, to now one of the top five softest at just over 14%. Overall, the national industrial markets are not healthy and have moved solidly into leaning toward being tenant-favorable, and only Los Angeles and San Francisco are still marginally below 10%, considered to be somewhat in landlord territory.

The Inland Empire Swing—the Biggest in the U.S.

The Inland Empire regional industrial market has become very tenant-favorable post-Covid, as supply and demand conditions for industrial space have shifted such that availability rates around the region have spiked in the last three years. Availability has more than doubled since pre-Covid from just under 7% to now just over 14%, and still rising. An even more troublesome benchmark is that the IE market availability today is four times higher than at the tightest market conditions in recent memory when IE availability was approximately 3.5% towards the end of 2021.

Oversupply Contributors

Much of this availability spike is based on speculative overdevelopment of industrial buildings built from 2020 to 2025 to support the surge of online consumer purchasing during the early years of Covid. Nationally, between 2020 and 2025, 1.2B SF of industrial space was built around the country, a historic supply increase of 13.11% over those five years, of which 111.9M SF was added to the Inland Empire inventory, the largest amount of new construction in any market in the United States.

The second contributor to this oversupply is that the region has been haunted by a spike in industrial sublease inventory, averaging 14,000,000 SF for three years running. A national phenomenon, many industrial companies are looking to shed excess space they leased during the 2020-2022 run-up. The specific reduction of imports coming into Southern California, and an increase in warehouse options in the Los Angeles area, have caused many Inland Empire operators to lean down their footprints and put excess space on the market for sublease. There are values to be had throughout the region in all size ranges. This sublease condition is expected to last well into 2027 and 2028, and creates a condition where tenants have become landlords’ biggest competitors.

How the Submarkets Stack Up

The chart below shows how every IE submarket is at 10% or higher availability, with the Temecula/Menifee region having the biggest uptick at over 25%, one of the highest availability rates in the entire U.S. With the exception of Corona/Eastvale, every other submarket has doubled availability as compared to the start of 2020, with Temecula/Menifee tripling since and Chino/Chino Hills increasing by 5x—one of the highest proportional spikes in the entire country. Warehouse space for lease often has been on the market for a year or two. While landlords are reducing rents, and free rent of a month per year has become table stakes, even on renewals, building owners have entered into a knife fight over tenants as demand continues to be tepid, and many tenants that do enter the market are looking to downsize.

Overall, the Inland Empire and national industrial markets have done a massive pivot in the last year where many U.S. metro areas have higher availability, a reversal in rents and a spike in concessions. We are dealing with a new normal where tenants can expect to continue to find good values and numerous opportunities for several years to come, as long as they are proactive in addressing their lease expirations and aggressively go to market with the right tenant advisor who is free of landlord listing conflicts of interest, to create the proper leverage and optionality.

Market statistics provided by CoStar Group.

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Over the past few years I’ve written a lot about the ways we bring color and joy into our offices, from playful artwork and polka dot murals to comfy couches in emerald green, royal blue and vibrant red. It all comes back to one simple belief: the spaces we ask our teams to spend their days in really do shape how they feel, how they connect and how they do their best work. I want to keep that conversation going with something that’s been on my mind lately, which is the wonderful link between creativity and how good we feel.

When was the last time you made something simply for the joy of making it? Not because it was part of your job or because someone asked you to, but simply because it brought you joy?

This year, The New York Times ran a piece in its Well section about how art and crafting are good for both our bodies and our minds. It highlighted the work of researcher Dr. Daisy Fancourt, who describes engaging in the arts as “the forgotten fifth pillar of health,” alongside diet, sleep, exercise and nature. That really resonated with me, because it put some real science behind something we’ve felt in our bones at Hughes Marino for years: being around creativity is good for us, and taking the time to create something ourselves might be even better.

We tend to treat creativity as a “nice to have,” reserved for the designers and artists among us. But more and more research says it belongs right alongside the rest of our wellness. The studies also show that engaging with art or other creative activities, even for a few minutes a day, can reduce stress, improve well-being and even support our long-term health. And when we go from looking to actually making, the benefits can be even greater. Whether it’s painting, crafting or another hands-on activity, creating gives us a chance to slow down, recharge and return to our work with a fresh perspective.

That’s a big reason creativity is baked into how we take care of our team. Some of our favorite team building activities include watercolor painting and “crafternoon” sessions, where teammates pause for a bit and enjoy spending time making something around the farm table together. There’s no pressure to get it right—only color, laughter, conversation and the happy feeling of creating side by side. Afterward, everyone feels a little more connected and a little more creative when they return to their desks.

One of my favorite thought leaders, Ingrid Fetell Lee (author of Joyful), likes to remind us that the ordinary things around us have real power to shape how we feel. Creativity is one of those everyday superpowers hiding in plain sight, and the best part is that inviting more of it into your office barely costs a thing. You can add it to any workplace, in any industry, a little at a time. Here are a few easy ways to start:

Curate Inspiration

Beautiful art and photography give the eyes somewhere fun to wander and the brain a chance to reset. Whether it’s a statement painting, striking photography or curated pieces from local galleries, art has a way of making the workplace feel more alive. You’re not simply decorating a space; you’re creating an environment that inspires people every time they walk through the door.

Make Room to Create

Tuck a few supplies into a cabinet for hands-on breaks: sketch pads, watercolors, a lump of clay to shape or a puzzle that’s always in progress (one of our favorite activities!). A few minutes of making can turn a rough afternoon around better than another cup of coffee.

Schedule Creative Time Together

While the design of a workplace matters, so do the experiences that happen within it. Put an hour-long painting session or “crafternoon” on the calendar and treat it as seriously as any strategy meeting. Making things together alongside teammates you might not normally spend much time with gets everyone laughing and builds stronger relationships that carry back into the workplace.

Press Play

Never underestimate what a little music can do for a room. A thoughtful playlist in your common spaces can lift the mood, ease the afternoon lull and get creative wheels turning, sparking a little conversation and camaraderie, without adding a single object to the space.

Create an Atmosphere That Inspires

Sometimes the smallest details have the biggest impact. Fresh or faux flowers can be a welcoming pop of color at the reception desk, and beautifully designed books or thoughtfully chosen decor can all contribute to an environment that feels welcoming and intentional. These elements may seem simple, but together they create an atmosphere that feels alive. They remind people that their workplace was designed with intention and that the experience of being there matters.

None of this takes a big budget or a design degree. What it takes is a little intentionality and a real belief that the spaces we build for our teams are genuinely worth it. Creativity isn’t a distraction from the real work. The science increasingly shows it’s part of what keeps us healthy, connected and inspired enough to do that work well. So this week, see if you can inject a little more of it into your office. Whether it’s a beautiful new piece of art, a painting afternoon with your team or simply a playlist that changes the mood of the room, my guess is you’ll notice the difference in the energy of your workplace. And more importantly, so will your team.

The post Injecting Creativity into the Office: The Art of Designing Spaces That Inspire appeared first on Hughes Marino.

      

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By Owen Rice & Gavin Curtis

One of our clients in the professional services industry had spent nearly 30 years in the same building. When their lease came up, the obvious move seemed simple: renew or find another office of comparable size. Instead, we took the company through a comprehensive needs assessment, and the conversations that followed changed the entire trajectory of the project.

The company ultimately relocated from 60,000 SF to 40,000 SF, yet its headcount grew. A smarter, more efficient workplace transformed roughly 20,000 SF of savings into a far better building that better supported its employees and long-term goals. In rent alone, rightsizing by 20,000 SF saved the company roughly $13 million over the term of the lease. On paper, it looked like a downsize. In reality, it was an upgrade.

We’ve seen this story countless times. Companies often begin a real estate project convinced they know exactly what they need. More often than not, they discover something they didn’t expect.

A workplace needs assessment is one of the first steps in any successful commercial real estate project. It combines a structured questionnaire with thoughtful conversations designed to understand how a company works today, where it’s headed tomorrow and what its workplace needs to support along the way. Done well, it shapes every decision that follows. Done as an afterthought, it’s often where expensive mistakes begin.

The Wrong Question

One of the first questions executives ask is, “How much space do we need?” Ironically, that’s an answer we don’t get fixated on.

The square footage number in your head is probably wrong. It’s usually based on today’s office, yesterday’s assumptions or simply the amount of space you’ve always occupied. Our job isn’t to validate that number. Our job is to understand your business well enough to determine whether it’s actually the right one.

Instead, we ask questions that lead us to the answer. How does your team actually work? What’s helping you attract and retain talent? What operational requirements could influence your real estate options? Where do you realistically expect to be in five years? Where are you investing in space that no longer delivers value?

Answer those questions well, and the square footage solves itself.

The Best Discoveries Are Often Internal

You know your business better than anyone. What you may not know is how that business translates into real estate. That’s where experience matters.

One of the most valuable parts of a needs assessment is uncovering blind spots before they become expensive decisions. We’ve worked with companies that were convinced everyone loved the office, only to learn that commuting challenges, a lack of privacy or outdated workspace design had quietly become frustrations for much of the team.

That doesn’t mean every employee makes the final decision; too many voices make consensus hard to reach. Instead, gather input from a core group that spans the business, not only executives, but the people across departments who see what leadership doesn’t. Anonymous feedback in particular can surface opportunities leadership didn’t know existed.

Every company assumes a needs assessment will confirm what it already knows. The best ones don’t. They reveal something unexpected.

The Cost of Waiting

The biggest mistake we see isn’t choosing the wrong building. It’s starting the process too late. When time is short, companies naturally focus on finding space instead of understanding what they actually need. The needs assessment becomes another task to complete instead of the strategic exercise it was meant to be.

The cost of changing direction early is minimal. The cost of changing direction after you’ve negotiated a letter of intent, signed a lease or begun construction can be substantial. Every decision made after that point has the potential to increase project costs, delay occupancy and reduce your negotiating leverage. That’s why the planning stage matters so much. It gives you the freedom to ask difficult questions, challenge assumptions and make adjustments while they’re still easy to make.

Where a Needs Assessment Pays Off

A thoughtful needs assessment doesn’t just help you find the right space. It helps you negotiate from a position of strength.

Understanding your requirements before negotiating a letter of intent allows your team to identify building improvements, operational requirements and future flexibility up front. Knowing your requirements is leverage.

Rightsizing cuts your total cost of occupancy, not just base rent: less tenant improvement to fund, less furniture and IT to buy, lower operating expenses year after year.

It also helps you plan for growth realistically. Most companies have a good sense of where they’ll be in a year or two. Beyond that, nobody has a crystal ball. Rather than planning for year 10 of a lease, we encourage clients to plan around realistic growth over the next five years while building flexibility into the lease for whatever comes next.

Perhaps most importantly, it saves executives both time and money. Real estate is rarely a CEO’s, CFO’s or HR leader’s primary responsibility. A thorough needs assessment filters out buildings that were never going to work, avoids unnecessary tours and minimizes costly course corrections, allowing leadership to stay focused on running the business.

Sometimes the process confirms exactly what you believed from the beginning. Great. Now it’s no longer an assumption. It’s a decision backed by thoughtful analysis and made with confidence.

The best needs assessments don’t simply confirm what a company already believes. They challenge assumptions before they become expensive decisions. Because when you ask the right questions at the beginning, every decision that follows becomes smarter.

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After touring thousands of office buildings over the course of our careers, paying attention to details becomes second nature. Long before we discuss square footage, lease terms or build-outs, we’re reading the small signs. Those details are clues to bigger things: how ownership actually operates and what you can expect over the life of the lease.

It Starts Before We Walk Through the Front Door

The tour begins in the parking lot, not the lobby. Does the building project the image our client wants? Is parking convenient or congested? Is it easy for employees, clients and visitors to find their way into the building?

From there, we’re paying attention to the condition of everything around us. I often compare it to the curb appeal of a home. The landscaping, exterior finishes and arrival experience all give you a sense of how much pride ownership takes in the property. We’re also looking at things that can’t easily be changed, like overgrown landscaping that blocks views or a neighboring building that permanently limits natural light. If maintenance has been deferred outside, there’s a good chance we’ll see similar patterns once we walk inside.

For industrial properties, we’re looking at many of the same things, just through a different lens. Some wear and tear from truck traffic is expected, but we’re paying close attention to the condition of the yard area, asphalt and concrete. We’re also looking at whether neighboring businesses are using their parking and truck storage areas appropriately.

The Common Areas Tell the Story

Before we ever enter the available space, we’re evaluating the building itself. We’re looking at the lobby, hallways, elevators, lighting, carpeting and restrooms. Are the elevators operating properly? Are the walls and common areas in good condition? Are the restrooms clean and well maintained?

None of those things alone determines whether a building is the right fit. Together, though, they tell us a lot. Within the first few minutes, you start to get a sense of how the property is managed and what you can expect over the course of a long-term lease. Your visitors read the same signals, forming an impression of your company before they reach your door.

Stained carpet, cracked tile, broken fixtures or deferred maintenance aren’t necessarily deal breakers, but they do tell us something. If visible maintenance has been deferred in the common areas, it’s reasonable to ask what the building will look like five or 10 years from now.

Look Past the Cosmetics

Once we step into the available space, we’re looking beyond the cosmetic finishes. Fresh paint and new carpet are relatively easy to replace. Are the ceilings and lighting current and code compliant? What condition are the plumbing fixtures, sinks and appliances in? That’s important because once you get beyond paint and carpet and start replacing lighting, ceilings, moving walls and plumbing, a build-out can easily cost three or four times more than a cosmetic update.

We’re also paying close attention to the orientation of the space, which deserves more consideration than it usually gets. In warmer climates, south- and west-facing windows can generate a tremendous amount of heat throughout the day, often forcing occupants to keep the blinds closed. North- and east-facing spaces typically provide more comfortable natural light, allowing employees to enjoy the daylight without the same heat and glare.

Who Else Occupies the Building?

One thing many tenants don’t think about is who they’ll be sharing the building with. We’re always analyzing whether the other tenants are compatible with our client. Medical offices, government agencies, call centers and other high-traffic users may be perfectly appropriate in one building, but they aren’t always the right fit for a financial services firm, law office or corporate headquarters. The tenant mix affects everything from traffic patterns, both on the road and in hallways, to the overall experience employees and visitors have each day.

Some Things Can’t Be Negotiated

Clients sometimes ask whether issues we notice in the common areas can simply be negotiated with the landlord. Sometimes they can. More often, those spaces serve the entire building and aren’t easily changed for a single tenant. More importantly, we’re not just evaluating whether a cracked tile or worn carpet can be replaced. We’re looking at what those details tell us about how the property has been managed over time.

Individually, these observations may seem minor. Together, they paint a much clearer picture of the building than the available space alone ever could. That’s why those first five minutes matter so much. A lease is one of the largest commitments a company will make, often lasting 10 years or more. Our job is to help clients understand not just the space they’re considering, but the building they’ll be occupying for years to come.

At Hughes Marino, we represent occupiers of space, not landlords. When we tour a property, our only interest is what that building will mean for our client’s business over the life of the lease. That’s the benefit of decades of experience and thousands of property tours: helping clients make one of the largest commitments their company will ever make with confidence.

The post Behind the Scenes: What We Notice in the First Five Minutes of a Building Tour appeared first on Hughes Marino.

      

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We sent the same set of questions to our advisors across the country, expecting the answers to split by geography and by the kind of space involved. But they barely split at all. The same lessons came back phrased a dozen different ways. These are the ones we find ourselves repeating, and the ones we wish every leadership team understood before stepping into the market.

Start Earlier Than You Think

If our advisors could offer a company only one piece of advice, most of them would spend it here: start earlier than you think. Companies routinely begin their real estate process four to six months before a lease expires, which is precisely when they have the least room to maneuver. Starting 12 to 18 months out changes everything. That runway is what gives a company time to tour real alternatives, gather competing proposals and let the facts, rather than the calendar, drive the decision. Time is leverage.

The most common misconception we encounter is the belief that there is plenty of time to figure it out. Most companies have less than they think, because the useful part of the process happens long before anyone tours a building: defining what success actually looks like, pulling comparable transaction data and deciding what the company is willing to trade for what. Skipping that groundwork is what leaves a company negotiating on the landlord’s terms.

You Have More Leverage Than You Realize

Companies also routinely underestimate how much pull they have. Landlords need occupancy and net operating income, and a well-informed tenant with genuine alternatives carries real weight, particularly in a market with elevated vacancy across nearly every major office submarket.

Many companies also assume their lease is static, that nothing can be done until it expires. In reality, there are often opportunities to restructure early, reduce occupancy costs, expand, contract or sublease well before the expiration date. They also tend to underestimate the value they create for their landlords, and therefore how much of that value they are entitled to share in.

Rent is Rarely the Whole Story

Ask a company what matters most in a lease and the answer is almost always the rent. Understandable, though it usually means the rest of the economics get far less scrutiny than they deserve.

There’s an old notion that real estate is a company’s second-largest expense after payroll. In practice, that is rarely true. For a distribution or manufacturing company, rent can fall into the low single digits as a share of total costs. For an office tenant, it often lands somewhere between four and six percent. We’ve seen office clients whose executive travel and hotel costs for the year outran their rent. The transaction feels enormous because it arrives all at once, but as a share of annual cost it is seldom the giant it appears to be.

Chasing the lowest rate can quietly cost a company far more than it saves. A poorly located building, one in weak condition or under indifferent management, or one that does nothing for recruiting or the brand, can undermine everything the savings were meant to protect. “The goal isn’t to get the lowest price,” says Senior Executive Managing Director David Marino. “The goal is to get what you want at the lowest price.” Concessions, operating expenses, taxes, parking, tenant improvements, moving costs and downtime all belong in the math.

Be Careful What You Commit To

Some of the most expensive mistakes we see are made by the most sophisticated companies, and they tend to cluster around the length of the commitment. Signing a longer lease to capture a few extra months of free rent can feel like a win, but doubling a five-year commitment to 10 years for marginal gains is rarely worth it. When a space requires significant tenant improvements or capital, a longer term can make sense. Absent that, every year beyond five deserves hard scrutiny.

The life science sector today is full of companies still paying for 10-year leases signed against growth plans that never materialized. Senior Managing Director Will Tober frames it as a question worth asking up front: “How long will this space meet my needs?” The answer, he notes, comes down to planning ahead. “If you’re thinking about expansion and contraction scenarios up front, you can build the appropriate flexibility and optionality into your lease.”

A related habit is the reflexive exercise of renewal options. These options are defensive by nature, and negotiating as a free agent, outside their parameters, almost always produces a better outcome. A renewal option is worth exercising only when the option terms beat what you could negotiate on the open market, or if the landlord wants your space for another tenant or use.

Create Competition, Even When You Plan to Stay

Companies often negotiate solely with their current landlord, even when renewing is the likely path. “Evaluating credible alternatives gives tenants leverage and almost always results in a better renewal deal,” Managing Director Austin Lashley points out. Credible means a real proposal from a competing building, priced and dated. It never has to be the space you choose, but it does have to be one you would actually sign.

The Advice Nobody Wants to Hear in the Moment

Some of our most valued counsel is the counsel clients least want at the time. Now and then, that means telling a company we don’t think a transaction is right for them, even one they have fallen for. A beautiful, extensively built-out space might call for a seven- to 10-year commitment when the stability of the business warrants something shorter. Executive Managing Director Owen Rice has had that conversation more times than he can count. Clients who walk away and land somewhere better tend to offer some version of, “I’m glad you didn’t let me force that one.”

There is one more piece almost no one wants to hear: signing the lease doesn’t mean the work is done. Someone has to track critical dates, confirm the tenant improvements are delivered on time and on budget, make sure free rent is honored and hold operating expense caps to what was negotiated. The language around operating and capital expenses, easy to gloss over during negotiations, can carry major financial consequences across the full term.

Treat Your Advisor as a Partner

If there is a thread running through all of it, it’s this: the companies that get the most from the process are the ones that treat their advisor as a true partner. For Executive Managing Director Alex Musetti, it comes down to candor. “The clients who explain their thinking out loud often see the best results.” The more we understand about where a company is trying to go, the better we can advise on how to get there.

What ties these lessons together is a single conviction: that a company is best served by an experienced advisor who sits on its side of the table. Hughes Marino only represents users of commercial real estate, so our advice answers to one interest alone: the company signing the lease.

These lessons are what that focus produces across three decades of negotiations. For any leadership team about to enter the market, the advantage is not any single tactic on this list. It is having an advocate in your corner whose only job is to work for you.

The post Insider Perspective: Advice We Find Ourselves Giving Again & Again appeared first on Hughes Marino.

      

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Information is power, and the other side has more than you

Most businesses don’t relocate every time their lease is expiring. As a result, lease renewals are far more common than lease relocations. Unfortunately, your landlord knows this firsthand. I sometimes say, “Nine times out of 10, businesses don’t want to relocate, and 10 times out of 10, the landlord knows this.” Which can make for challenging negotiations when a business seeks to renew an existing lease. I wrote about this previously, and about the premium rents landlords try to extract on renewals, and I gave it a name, the “Lease Renewal Loyalty Premium.” This article is about an important additional detail: As a business owner, you make things dramatically worse with a single decision—when you decide to go it alone.

What do you do when you want to relocate your business? You almost certainly hire a broker. They know the market; they can find the buildings and drive a competitive process to identify and negotiate for the best possible outcome. That’s what good brokers do. But hey, if you’re not looking to relocate, then what do you need a broker for? You like your building and you like your landlord. You don’t need to see other buildings; you just need to negotiate a fair contract extension. You’re an excellent negotiator. You negotiate contracts every day. What’s more, with AI as a tool, now you can research the market, find your own comps to understand what others have paid and where market pricing is today.

If only it were that simple. But knowing a few recent comps and getting there (or better) with your current landlord do not go hand in hand. To borrow a phrase from my adventuring days, the map is not the territory. Knowing where you want to go and getting there are two very different things. And here’s the problem: When you approach your landlord directly, you’ve made it crystal clear that you are not looking at competing buildings because you haven’t hired a broker to scout out those locations. You’ve telegraphed your punch and confirmed what the landlord already suspected, that this is a renewal, and that they are not going to need to compete with the open market in order to keep you in the building paying rent.

Just how far will landlords go in order to enjoy occupied buildings with rent checks coming in? They will go as far as they need to go, every time. And if they don’t need to stretch in order to keep you in the building, then they won’t stretch. Why would they? It seems crazy to think that the single action of hiring a broker can shift the game so entirely. And it does. Every time. When you telegraph your punch and engage directly with your landlord in negotiations to renew an existing lease, it’s like you are trying to bluff while playing poker with your cards face up, against a professional poker player. In my opinion, this is not a recipe for riches.

There’s a better way. Don’t telegraph your punch. Don’t go it alone, even and especially when you’re certain you’re staying. And definitely do not try to bluff when all your cards are face up.

The post You’re Telegraphing Your Punch (On Your Lease Renewal) appeared first on Hughes Marino.

      

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Availability has fallen to 13.5%. Asking rents are up roughly 11% off their 2023 trough. Sublease space, the clearest sign of a market with too much room in it, has dropped 37% in under three years. The market has tightened, and the reason it tightened is the reason it is unlikely to loosen again any time soon.

Orange County has Stopped Adding Office Space

In two and a half years, Orange County has added no new leasable office space at all. Looking at what has been delivered, the focus has not been on traditional office space. Twelve buildings have been delivered since 2024, and not one of them is a multi-tenant office building a conventional tenant could lease. Eight are medical office. Two were built for owner occupants or as build to suit. The two remaining are a medical building and an office condominium sold by the unit.

Supply hasn’t just stalled at the top, rather it’s shrinking from the bottom. Between 2020 and mid 2026, 5.6M SF of Orange County office has been demolished, about 3.6% of the county’s 157.4M SF office base in 2020. Some estimates suggest another 4M SF is planned for conversion or demolition, which would bring the combined reduction to roughly 6% of the pre-pandemic base.

And the Next Round is Already Entitled

This is not just a pause in construction. Buildings are leaving the leasable market permanently, and the projects moving through Orange County city halls show where the next reductions are coming from.

Together these projects account for more than 2.9M SF of Orange County office buildings, and city records show office to housing conversions underway at five separate addresses on Dove Street.

This is Not a Demand-Driven Recovery

Landlords have started quoting improved absorption. Net absorption over the past 12 months came in at a positive 1.7M SF after four negative quarters, and occupancy has improved from 86.7% to 89.1%.

The figure does not survive scrutiny. Nearly half of it landed in a single quarter. Over the same 12 months, leasing activity fell 2.3% in square footage and 1.2% in deal count, and average lease size has been flat to declining. Tenants are not signing more leases, or larger ones. Much of that space was absorbed by tenants relocating out of buildings slated for redevelopment. The same demand is moving between buildings, rather than new demand entering the market.

The Reported Numbers Understate How Tight This Is

Availability has fallen across every major submarket. The Stadium Area has come down from a 21.4% peak to 15.9%, Irvine Spectrum from 20% to 15.5%, and the Airport Area from 18.9% to 14.1%.

Aliso Viejo looks like the exception at 30.5%. In practice it is the clearest evidence of how far the data lags reality, because several buildings still counted as available have already been emptied ahead of redevelopment. That space will never return to the leasing market, but it stays in the availability figures until the buildings come down. The same is true countywide, which means 13.5% overstates what a tenant can actually lease in Orange County today.

Nothing is Coming to Replace It

Orange County has 194,000 SF of office under construction, down from 1.75M SF in mid 2020, and construction starts over the past 12 months totaled zero. One building, The Weave at ocV!BE in Anaheim, accounts for 87% of that pipeline, and it does not deliver until late 2028. The other four projects total 25,587 SF combined, and two of those are medical.

What This Means for Tenants

Softness has not disappeared from Orange County, but it is no longer a market condition. It is now specific to individual submarkets, and increasingly to individual buildings. That makes understanding a landlord’s strategy more important than it has ever been, for two reasons. It protects a tenant from committing to a building that may be headed for redevelopment. And it identifies where genuine negotiating flexibility still exists, because it is no longer evenly distributed.

Ownership matters more than it used to as well. Buildings that have traded to private, long-term holders rather than developers came with a low-cost basis, and those owners can compete on price in ways an institutional landlord carrying a higher, pre-pandemic basis simply cannot.

Consolidation is happening across the county in real time, and every displaced tenant becomes a competitor for the space that remains. Tenants with leases expiring in the next 24 to 36 months should be starting those conversations now. Six years of favorable timing taught Orange County tenants to wait. The market that rewarded that instinct is now gone. Tenants no longer hold uncontested leverage, and the smart move now is to act before rents catch up to the shrinking supply.

Market statistics provided by CoStar Group. Development activity per city planning and entitlement records.

The post Why Tenants Should Move Earlier Than They Planned appeared first on Hughes Marino.

      

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I.  THE DETAILS

Looking at an overall market report can be helpful, but without context it can be misleading. Every submarket, city, neighborhood and even individual building sits differently within the larger market. This section looks at the four primary regions of Orange County.

Rents are higher as you move south and lower toward the north end of the county, a pattern that has held through every phase of this cycle. What has changed is where the empty space now sits.

South County has the most expensive space in the county at $1.76 per SF per month, and the highest availability rate at 10.8%. That combination is unusual, and it is the best opening in Orange County today for a company that wants quality space at a negotiable price. West County is now the tightest submarket in the county at 6.9%, with asking rents at $1.41. The Airport Area is close behind at 7.3% and $1.55. North County is the most affordable at $1.46.

II.  THE BIG PICTURE

The table below is a snapshot of average figures for Orange County as a whole.

Last year we pointed to three forces pushing this market down: too much new construction, a flood of space that companies were trying to sublease and weak demand. Two of those three have largely run their course. Construction has nearly stopped, with only 721,000 SF being built across the county today against 2.4M SF a year ago. Net absorption was negative 198,000 SF over the past year, compared with negative 2.4M SF the year before, an improvement of more than 90%.

What has not corrected is price. Asking rents on available space have fallen to $1.41 per SF per month, down about 17% from the peak at the end of 2023 and down 6% in the past year alone. Owners are holding their published rates steady and giving ground through free rent and construction allowances instead, which means the advertised number understates how much room there is to negotiate.

III.  THE BUZZ

A major landlord starts shedding assets: On August 18, Rexford Industrial entered a definitive agreement to sell a Southern California industrial portfolio to EQT Real Estate for $1.2B. The deal is part of a $2B initiative to shed non-core assets with above-market rents and anticipated move-outs.

Office is quietly becoming industrial: The Anaheim site is a 133,836 SF office campus being demolished for industrial use. It is the same dynamic we are seeing on the office side of the market, where older buildings are being removed from inventory rather than re-leased. Either way the space leaves the market permanently, which is part of why availability is no longer climbing the way it was.

Sublease space nationally hit a record: Hughes Marino research put United States industrial sublease space at a record 278M SF entering 2026, higher than the pandemic peak for office sublease space. Orange County’s 4.4M SF is a small slice of that total, but it is the same story playing out locally.

IV.  THE TREND

The true health of a market is better judged by its availability rate than its vacancy rate. Vacancy counts only what is physically empty today. Availability counts everything being marketed, including space a company still occupies but has already listed. Availability is the better early warning signal because it shows what is coming to market, not only what has already arrived.

For most of the last decade that line moved steadily downward as space became harder to find. It reversed in 2023. Availability in Orange County has gone from 2.7% at the end of 2022 to 8.9% today, the highest level since late 2011. The pace has slowed sharply, though. Availability rose about one point over the past two years combined, after jumping nearly three points in the twelve months before that.

The second line on the chart reflects rent. Asking rents on available space peaked at $1.69 at the end of 2023 and have come down to $1.41. That is still well above where this market sat before the pandemic, when it was near $1.05. This is a correction, not a collapse.

V.  THE NEIGHBORS

The neighboring Inland Empire has been Orange County’s early warning system throughout this cycle, and its signal has changed. Availability moved from 11.9% to 12.2% over the past year, after gains of 0.7 and 1.7 points in the two years before. Rents have held at $1.05 for the past year, after dropping 21% from their 2023 peak. Net absorption was positive at 4.3M SF over the past year.

Unlike markets where developers overbuilt speculatively, the Inland Empire’s correction was driven by over-leasing during the pandemic boom, not overbuilding—a different problem, and one closer to resolving.

Set against the rest of the country, Orange County looks less like a market in trouble and more like one that never overbuilt. At 8.9% it has the second lowest availability rate among the thirteen markets below, and the most expensive space at $1.54 per SF. Markets where speculative development ran hardest last cycle—Phoenix, Las Vegas and Seattle—all sit at 12.5% or higher.

The correction is not over, but it is no longer accelerating. For any company with a lease coming due in the next two years, understanding Orange County’s changing market conditions is essential to leveling the playing field against any capable landlord.

Market statistics provided by CoStar Group, Orange County Business Journal and Connect CRE.

The post Summer 2026 Orange County Industrial Market Report appeared first on Hughes Marino.

      

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Something happened recently that we couldn’t ignore. Two of our advisors, Jack Riazzi, senior vice president in Charlotte, and John Jarvis, managing director in San Diego, sat down within weeks of each other and independently wrote nearly the same warning to tenants. They never compared notes. They landed on nearly the same title. That kind of coincidence tells you how strongly we feel about this, because it’s the thing we see every day and can’t stop talking about: the information gap between landlords and the companies who lease from them. In this piece, Jack takes the psychology: what your landlord already knows about you before you ever sit down, and the pressures on their side that you can’t see. John’s companion piece takes the other half, the mechanics of the lease itself. Same table, two coasts.

Six things the other side of the table is hoping you don’t know

Most tenants we meet want to talk about the same number first, the rate per square foot, and landlords are perfectly happy to let them. It’s the one term they worry about least, because landlords know the real economics of a lease live almost everywhere else. That’s the first thing they understand that most tenants never learn.

The biggest advantage a landlord holds isn’t experience, it’s information. They know how transactions are structured, where the flexibility is hiding and how to create leverage at exactly the right moment, while most tenants only ever see a fraction of that picture. Below are six things they know, and are hoping you don’t.

1. Your Representation is Already Paid For

The most common reason a company hesitates to bring in an advisor is the worry that it’ll cost them, and we hear some version of this all the time. If we bring someone in, won’t that make the deal more expensive or harder to close?

Landlords know that hesitation, and they are quietly counting on it. What they won’t volunteer is that commissions are already built into the economics of the building, a cost that exists whether you have someone advocating for you or not. Choosing to go without representation doesn’t save you a fee. It simply means the only experienced people in the room are working for the other side.

2. The Asking Rate is Bait

Asking rates aren’t offers, they’re anchors. They’re there to start the conversation in the landlord’s favor and to leave room to look generous later while giving up very little that matters.

A tenant who fixates on talking that headline number down a few dollars is playing exactly the game the landlord wants to play. The concessions that actually move the cost of a lease are sitting in the terms most tenants never think to ask about, which brings us to the part of the deal that matters most.

3. They’re Negotiating Your Leverage, Not the Market

Tenants love to ask whether now is a good time to sign, and from a landlord’s perspective that is the wrong question entirely. They are not really negotiating against the market, they’re negotiating against your leverage, and they can read it quickly.

Leverage comes from a few specific places: the number of real alternatives you have in play, the runway before you have to make a decision, and your genuine willingness to walk away. A tenant with options and time creates competition, and competition is the only thing that reliably moves a landlord. A tenant with no alternatives and a looming deadline has already told the other side everything it needs to know, often without saying a word.

4. Their First Proposal is Built to Move

Landlords expect to negotiate, and their opening terms are written with that expectation already baked in. The mistake tenants make is treating that first proposal as though it is close to market, when it rarely is.

Real improvement usually only shows up after three things become true. Credible competing options enter the picture, the timeline gets real and the landlord starts to believe the deal could actually slip away. Until those signals are on the table, there’s very little reason for anyone to sharpen a thing, and the landlord knows exactly how to wait you out until you hand them one.

5. The Lease is Won in the Details

Rate gets all the attention, but the structure is what actually determines the outcome. There are far more moving parts in a lease than most companies realize going in, and each one can shift the cost, the flexibility and the risk of the whole deal.

As you can see, beyond base rent, the list runs long:

• Annual escalations
• Tenant improvement allowances and how they are funded
• Free rent and when it applies
• Renewal and extension options
• Expansion rights or rights of first refusal
• Contraction and flexibility provisions
• Assignment and sublease language
• Guarantee structures
• Operating expense pass-throughs and how controllable they are
• Expense caps and audit rights
• Maintenance and capital expenditure responsibilities
• Delivery conditions and timing
• Default and cure provisions
• Early termination or buyout rights

Each of those can quietly turn a deal that looked competitive on rate into a poor one when the rest of the document is left unnegotiated. Landlords understand this better than anyone, because the structure is where they earn back whatever they conceded on the headline number.

6. They’ll Trade Real Money for Certainty

Here’s the one most tenants never use to their advantage. Certainty is worth money to a landlord because it lowers their risk, which means a strong financial profile, a longer commitment and a clean and straightforward deal structure all carry real value on the other side of the table.

A tenant who understands this can trade that certainty for concessions deliberately, offering the landlord something it genuinely wants in exchange for something that matters more to you. A tenant who does not understand it tends to give the very same certainty away for free.

The Bottom Line

Landlords aren’t better negotiators because they’re smarter. They have the advantage because they live in this every day, are fluent in the nuances, know the pressure points and understand the places where flexibility quietly exists. Most companies negotiate a lease once every few years, and that imbalance is exactly what landlords rely on.

Going without representation doesn’t make the process simpler. It just means walking in with far less information and experience than the party sitting across the table.

At Hughes Marino we work for occupiers of space, not landlords, which means the whole perspective we bring to your real estate negotiations belongs to you. Our job is to give you what the other side has always had: a clear view of how landlords think and where the real opportunities are. Because once you understand what the other side knows, every decision changes, and you negotiate accordingly.

The post What Your Landlord Knows (That You Need to Know) appeared first on Hughes Marino.

      

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Overcoming information asymmetry in commercial lease negotiations

Imagine sitting down to a poker table when the dealer shuffles the cards, cuts the deck and deals…except their cards are all face down and yours are all face up. Yep. This is what most tenants experience when negotiating building leases opposite institutional property owners. It’s the age-old problem of information asymmetry. At the risk of stating the obvious, it makes it kind of hard to bluff. So how does this happen? And how do we fix it? Let’s dig in.

They Know What Every Tenant in Your Building Is Paying

Your landlord is a party to every other lease in your building. Every tenant, every rate, every concession, every package of free rent, moving allowance and tenant improvement dollars. They know what the accounting firm on the third floor pays per square foot. They know what they had to give to win the three-floor tech company on seven, eight and nine. They know it all, from the tenant who was well represented by a seasoned tenant-side advisor, to the tenant who tried to go it alone and left massive dollars on the table.

They Know You’re Not Going Anywhere

It’s not surprising that the landlord’s property manager has a great relationship with your office manager. The property manager’s just doing their job. Those two talk all the time. Very cordial. Very friendly. And when your office manager, being friendly in return and making small talk, volunteers that your team does love the building and really does not want to move, of course that information finds its way to the building owner’s leasing team.

And let’s talk about that darn carpet. Your team just spent $95,000 on new carpet! You don’t do that if you are planning to move. Of course, the landlord is paying attention, and the carpet refresh is a tell. It’s a clear sign that you’re comfortable, that you’re settled and that you’re not going anywhere anytime soon. In other words, they know the cards you’re holding.

None of this happens by accident. Institutional landlords are sophisticated operators. Cultivating soft intelligence about tenant satisfaction and switching costs is part of how they manage their buildings and their investment. By the time you sit down to negotiate, they already have a very good sense of how things are going to play out.

They Also Know How Low They Can (And Can’t) Go

Behind every lease negotiation is a proforma, a financial model that tells the landlord precisely what the deal needs to look like in order to deliver the net effective rents that allow them to deliver on their proforma (aka promised) returns to their investors and their lender. They know their bottom line. And even if the market has declined below their proforma threshold, they can’t and they won’t.

And They Know That They Have a Problem

Yep, the landlord has a problem that you don’t know about. You see, they have a loan, with a balloon payment due at loan maturity, and it’s just a few months away. If you’re 2,000 square feet, maybe your lease doesn’t move the needle. But if you’re 20,000 square feet? Maybe it does. And if you’re 200,000 square feet? Your lease could be the difference between delivering those promised returns for their investors and delivering a deed in lieu of foreclosure.

So How to Even the Odds

You don’t have to play blind. The information asymmetry is real, but it’s not insurmountable. A strong tenant advocate or tenant-side advisor knows how the game is played and can help you to close the information gap. Just like the landlord, a top-tier tenant advisor does a large volume of business on the tenant side. They know what other tenants are paying, both the renewal tenants and the highly sought-after tenants that are signing new leases for the largest vacant spaces. They know how to run the landlord’s math. They know the landlord’s proforma targets, the concessions they’ve made in the past and the additional concessions they can afford to give away today.

Most importantly, they know how to coach you and your team to approach every project with an open mind and to consider what you would do differently in a new building if you did relocate. In other words, they know how to lead a process, because it is never just a lease renewal. A good tenant-side advisor who has worked transactions for years will know this first-hand.

When negotiating opposite your institutional landlord, you don’t have to simply play the cards you are dealt. Before you engage, take the time to hire an experienced and qualified tenant representative, someone who has experience as a tenant and buyer-side advisor, someone who has a long history in commercial lease negotiations as a tenant advocate, someone who can make you as smart (or smarter) than the property owners on the other side of the table. Once you’ve done that, with a strong advocate in your corner, you’ll be in a position to shuffle up and deal.

The post What Your Landlord Knows (That You Don’t) appeared first on Hughes Marino.

      

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