Although the 12-month horizon for Southern California’s industrial market isn’t readily visible, Wonderful Real Estate president Joe Vargas has a clear view of the current landscape. “We’re operating in an environment where we’re trying to work through three major issues,” he told Connect CRE. These include “the aftereffects of a presidential election, catastrophic fires, and tariffs—geopolitical pressures. All this leads to instability, and in my view, transactions have stalled out for the time being.”
Vargas will be among the industry leaders taking the stage at the Hyatt Regency Irvine on Thursday for Connect Orange County 2025 for a discussion of the SoCal industrial market. He sees OC as an especially hospitable place in which to do business.
“Name me a better place to work and live than Orange County,” he said. “It’s just a great environment that provides tremendous tailwinds for business and people and families. To me, that’s the greatest asset of Orange County.”
In the current market, industrial tenants have the upper hand. “Those of us that work in the logistics and industrial business got used to historically low vacancy rates and hyper-growth rents, and that doesn’t exist right now,” said Vargas. “There’s a lot of product that has been added to the market since 2022. Through the normal course of absorption, you will chip away at the vacancy rate. But for the time being, it’s a tenant’s market.”
The strategy for a landlord depends in part on the debt maturity timetable at a property.
“If you’re a landlord and you have a time clock that’s ticking down, then you need to figure out a creative way to make a deal,” Vargas said. “And what are those creative ways? Beneficial occupancy, delayed commencement [of leases], conversion of dollars into rent or other concessions. You can’t create a deal, you have to make the deal that’s in front of you, so you have to figure out a way to do it.
“Now if you don’t have that ticking time bomb of a clock, then you can sit and wait.”
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