Abstract
In the first quarter of 2026, the East Bay industrial market experienced a rise in vacancy rates, negative net absorption, and a slight decrease in asking rents to $1.22 per square foot for warehouse buildings measuring 50,000 square feet or more.
East Bay
ECONOMY
In 2026, national employment in the warehouse and storage sector experienced a slight year-over-year (YOY) decrease. However, as of February 2026, approximately 1.8 million individuals are employed in this sector, marking a substantial increase of nearly 500,000 employees since 2020.
The recent softening in warehouse and storage employment reflects softer retailer demand driven by a pullback in goods consumption, lingering oversupply from pandemic-era warehouse development, and rising cost pressures tied to tariffs and supply chain uncertainty, which have caused some occupiers to delay expansion or scale back space and labor needs.
Workforce reductions also highlight ongoing efforts by retailers and logistics operators to streamline distribution networks, as they adapt to shifting consumer behavior, slower e-commerce growth, and persistent labor challenges.
Port of Oakland container volumes have decreased slightly in 2026 compared to 2025. Import volumes in February experienced a significant YOY decline of 19.6% as reduced vessel capacity limited inbound cargo. Export volumes declined 9.5% YOY, demonstrating greater stability than imports amid shifting market conditions and reinforcing Oakland’s role as a key gateway for U.S. agricultural and refrigerated commodities.
VACANCY
The vacancy rate for warehouse buildings measuring 50,000 square feet (SF) or more has increased in Q1 2026 to 8.0%, up from 7.7% in the fourth quarter of 2025.
In Q1, sublease vacancy rates experienced an increase of 90 basis points (bps) on a quarter-over-quarter (QOQ) basis, bringing the current rate to 0.9%.
An abundance of available space has created a highly tenant-favorable environment in which cost-conscious occupiers can take advantage of increasingly competitive pricing without significantly sacrificing building quality or location. This allows tenants to secure space that meets both operational needs and budget priorities. This dynamic has further reinforced tenants’ leverage in negotiations, as landlords compete to attract and retain interest within an oversupplied market.
RENT
Average asking rents ended Q1 2026 at $1.22 per square foot (/SF) per month. Rents have marginally decreased on a QOQ basis where rents settled at $1.24/SF in Q4 2025.
In Q1, asking rents are beginning to ease amid a combination of softening demand and increased space availability, leading landlords to recognize the growing importance of securing the next transaction in a market with fewer active opportunities.
There is currently a substantial volume of Class B industrial space on the market, with a notable gap, often 10–20%, between quoted asking rents and executed lease rates; despite the widespread publication of higher asking rents, transactions are closing at lower levels. At the same time, an excess of available supply has slowed negotiations, as tenants remain firmly in control, taking extended timeframes to evaluate choices and actively seek pricing advantages in a tenant-driven environment.
DEMAND
Net absorption totaled negative 162,280 SF during the quarter, representing a shift in market momentum and marking the first occurrence of negative absorption after two consecutive quarters of positive net absorption, as move-outs outpaced new leasing activity.
Currently, the market shows a significant volume of available industrial space in the 25,000 to 50,000 SF range, though this size segment has experienced limited touring activity and reduced transaction levels. In contrast, the 50,000 to 100,000 SF segment has generated the greatest share of completed transactions. Overall, tenant demand appears evenly distributed across size categories, with no single size range demonstrating outsized or exceptional demand relative to others.
In Q1, landlords are increasingly prioritizing power upgrades as a key building improvement to accommodate the needs of advanced manufacturing and robotics users, as much of the existing inventory does not meet today’s higher power requirements. As a result, tenant demand is increasingly concentrated on facilities with heavy power capabilities.
Total leasing activity for Q1 2026 was 1.6M SF in buildings over 50,000 SF. This figure is currently above the leasing average from the last three years where the average quarterly leasing was 1.3M SF. Total leasing activity is down 900,000 SF QOQ where total leasing activity in Q4 totaled 2.5M SF.
CONSTRUCTION
Currently, 500,000 SF of speculative product is actively under construction, spread across three projects comprising a total of five buildings.
There is 2.4M SF of planned construction in various stages. Planned projects signal developer optimism, reflecting a growing confidence that improving market fundamentals will support new investment and that flexible, forward-looking development will be positioned to meet evolving tenant expectations when leasing momentum returns.
Building 1 at Overton Moore Properties’ Oaks Business Park, located at 710 Atlantis Street in Livermore, completed construction during Q1. The newly delivered industrial facility spans a total of 471,469 SF and was fully pre-leased to Lam Research in 2023, underscoring strong tenant demand and long-term confidence in the project well ahead of delivery.
The Kennedy Logistics Center, located at 727 Kennedy Street, is currently in the construction phase as part of an industrial redevelopment initiative. Upon completion, the project will deliver approximately 176,889 SF of modern industrial space and is scheduled to be available for occupancy in the third quarter of 2026.
CAPITAL MARKETS
Capital is leaning in again, but underwriting is tighter as higher and more volatile debt costs keep buyers focused on downside protection and realistic exit assumptions.
The market is transitioning from correction to equilibrium, with vacancy nearing a peak and tenant demand becoming more consistent QOQ.
Development has effectively reset, with starts down sharply.
In Northern California, leasing momentum is rebuilding, particularly for smaller-bay and mid-size product in core locations.
Pricing is becoming more actionable as bid-ask spreads narrow, especially for assets with near-term cash flow and clear mark-to-market potential.
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