Author: Vesperlight

The Turn

After a two-year construction slump, U.S. warehouse development is accelerating again. More than 305 million square feet of industrial real estate was under construction nationwide in the second quarter of 2026, up 18% year-over-year and marking the second consecutive quarter of annual growth, according to Cushman & Wakefield.

Q2 leasing volume was the strongest since mid-2022, giving developers the confidence to break ground on new projects. Prologis plans $4.5 to $5.5 billion in development starts this year, up from $3.1 billion in 2025. Panattoni, based in Irvine, is ramping up starts by 62% over last year.

But the pipeline remains well below the pandemic-era peak of 725 million square feet under construction in Q3 2022. As Doug Roberts, Panattoni’s president of North American development, put it: “We’re still cautiously optimistic, but nowhere near what it was three, four years ago.”

What’s Driving the Comeback

The demand picture has shifted from the pandemic’s e-commerce surge to a more diversified set of drivers:

• Data centers and AI infrastructure – Prologis expects 40% of its 2026 development starts to be data centers, responding to the rapid build-out of AI computing capacity nationwide.
• Tariff-driven inventory stocking – Retailers are leasing space to warehouse goods ahead of potential tariff changes, pulling demand forward.
• Manufacturing reshoring – Companies bringing operations into the U.S. need industrial space, supporting a structural rather than cyclical demand layer.
• Third-party logistics growth – 3PLs are expanding to meet outsourced fulfillment needs.
• Supply-chain diversification – As Henry Steinberg of EQT Real Estate noted, tenants are seeking to mitigate risk from port backlogs, tariffs, and natural disasters by creating more diversity in their supply chains.

What This Means for the South Bay

The national trend has specific implications for the Carson, Wilmington, and Torrance industrial corridor that we track daily:

Port-proximate markets are the first to feel the shift. The same tariff concerns driving national leasing demand are amplified here, where tenants depend on POLB and POLA throughput. We are already seeing tenants who paused renewals in 2024 and 2025 returning to the market, often with shorter decision cycles.

New construction in this market remains constrained. The South Bay lacks the large developable parcels available in Inland Empire or the Houston market. What gets built here is infill and redevelopment, not greenfield. That means existing space commands a premium when demand accelerates, and it means tenants who locked in rates in 2023 and 2024 are sitting on increasingly favorable lease positions.

Data-center demand is not a primary driver locally – yet. The South Bay’s industrial stock is weighted toward logistics, transload, and container freight operations. But the secondary effect is real: as data-center operators absorb space in Inland Empire and the High Desert, traditional logistics users get pushed toward port-proximate submarkets like ours.

The Risk Side

The development rebound is not without headwinds. The Federal Reserve has signaled potential rate hikes if inflation persists. Consumer sentiment remains near record lows. And companies pulling holiday merchandise forward to get ahead of tariff costs and Iran war-related disruptions are expected to reduce imports later in the year, which could soften near-term port-adjacent demand.

Jeremy Garner of Trammell Crow noted that coastal markets where construction had slowed are “seeing green shoots now and reasons to move forward with more development.” The question for our market is whether those green shoots translate into speculative starts or remain driven by pre-leased demand.

Bottom Line

The industrial market is turning a corner, but it is a measured turn, not a return to 2022. For South Bay tenants, the window to secure favorable lease terms is narrowing. For landlords, the pressure to fill vacant space is easing, but concessions remain available for creditworthy tenants willing to commit to longer terms.

Source: Liz Young, “Developers Are Back to Building U.S. Warehouses,” Wall Street Journal Logistics Report, July 15, 2026.

Vesperlight Real Estate Services tracks South Bay industrial market conditions daily through AIR CRE data, port statistics, and direct broker relationships. Contact us for current market intelligence specific to your submarket.

California’s logistics and industrial real-estate community has entered a new phase of clarity and implementation following the passage of Senate Bill 415 (SB 415) in October 2025 — the legislative refinement to the landmark warehouse siting and design framework established in Assembly Bill 98 (AB 98) in 2024. SB 415 was devised to fix early implementation challenges that jeopardized feasibility for many logistics projects.

On November 20, 2025, industry stakeholders, local officials, developers, and land-use consultants convened at a Town Hall hosted by AIR CRE and featuring expert commentary led by Skyler Wonnacott of the California Business Properties Association (CBPA).

The discussion provided the most detailed public walkthrough yet of SB 415’s mechanics, compliance pathways, and remaining gaps — and confirmed that the law is now operational, but not yet settled in practice.

What SB 415 Fixed — Town Hall Takeaways 

The Town Hall session underscored SB 415’s role as an implementation-ready update rather than a reversal of AB 98. Key points emphasized included: 

1. Clearer Scope with “Logistics Use Development”

SB 415 establishes a solid baseline for what qualifies as a covered logistics project: 

• A single building 

• Primarily for warehousing/storage for distribution to business or retail customers 

• Involving heavy-duty trucks 

The session confirmed that ancillary industrial uses — like manufacturing or agriculture (below 90 days of seasonal use) — remain excluded, avoiding overreach into unrelated industrial real-estate categories.  

2. Thresholds & Triggers Fine-Tuned

A building enters the Warehouse Standards framework if it is 250,000+ square feet per building, not on a cumulative site basis — a key clarification for multi-building logistics parks. Office space no longer contributes to the 250,000 sf metric.  

Town Hall Q&A solidified interpretations around expansions, mezzanine additions, and what kind of improvements might or might not trigger compliance, which is critical for owners planning phased expansions or redevelopment.  

3. Sensitive Receptor Proximity Matters

Design and mitigation requirements only kick in if a loading bay is within 900 feet of a sensitive receptor — including homes, schools, daycares, or actively used playgrounds. Passive parks alone do not count, helping reduce over-application of design restrictions in contexts where community exposure is minimal.  

This clarification gives developers confidence to pre-screen properties in early feasibility.  

4. Buffers, Setbacks & Real-World Feasibility

The session walked through setback, screening, and noise/light mitigation requirements — but also acknowledged that strict “opposite side dock orientation” provisions from early AB 98 language were no longer enforced.

SB 415 now requires dock doors to face away from the closest sensitive receptor “to the extent feasible,” a major win for modern cross-dock logistics design.  

Other elements reinforced practicality: 

• Buffer areas may include landscaping, walkways, parking, and even public rights-of-way 

• A single truck entrance with dedicated lanes satisfies circulation requirements 

• Anti-idling rules apply only when power capacity is sufficient for plug-in alternatives  

What the Town Hall Identified as Unresolved 

Despite broad progress, the November 20 discussion highlighted three areas still lacking legislative or regulatory closure: 

1. Redevelopment Treatment Still a Problem: Under current law, demolition followed by rebuild is treated as new development and fully subject to Warehouse Standards. The Town Hall flagged this as a major pain point for infill redevelopment, especially in legacy industrial markets where modernization is key. Industry groups have signaled this will be a top priority in 2026.  
2. Local Implementation Variability: While SB 415 provided statewide definitions, local agencies are still building interpretation frameworks. How towns map sensitive receptors, adopt truck routes, and interpret setbacks will determine real-world feasibility in specific submarkets. The Town Hall made clear that best practices are emerging, but not uniform.  
3. Enforcement & Monitoring: SB 415 requires updated circulation elements and truck-routing plan adoption by cities and counties. However, enforcement — particularly how the Attorney General will evaluate good-faith efforts vs. noncompliance — remains unresolved. There’s also ongoing uncertainty around how environmental monitoring data (e.g., air quality metrics in industrial zones) will influence future policy evolution.  

Why This Matters to CRE Professionals 

For brokers, developers, investors, and land-use consultants, the November Town Hall did more than recap statutory language — it connected regulatory text to entitlements and asset strategy: 

✔️ Feasibility modeling is now possible: Owners can determine whether a site is subject to the Standards with confidence. 
✔️ Design pipelines are clearer: Standard metrics for setbacks, buffers, and truck circulation allow predictable cost-estimating and program planning. 
✔️ Cross-dock viability preserved: Logistically efficient layouts will no longer be prohibited by rigid orientation rules. 
✔️ Sensitive receptor mapping matters more than ever: CRE teams must integrate this into underwriting and site selection workflows.  

Looking Ahead: What’s Next 

With SB 415 now in effect and the implementation phase underway, the CRE community should be watching for: 

📌 Model ordinances and circulation element updates from cities and counties — which will define truck routing in markets statewide. 

📌 Future legislation addressing redevelopment and modernization exemptions. 

📌 Emerging enforcement guidance from state authorities that will shape how jurisdictions comply and how strictly standards are applied.