Midlands Big-Box Warehouse Supply Falls as Demand Rises and Construction Slows – CoStar Data Shows Turning Point in Real Estate Market

The CoStar data released today confirms what many in the industrial real estate sector have been sensing: the Midlands big-box market has hit a turning point, with supply finally beginning to fall after a prolonged period of growth. While the report focuses on the UK’s Midlands region—covering areas like Derby, Nottingham, and Berkshire—the implications ripple far beyond the Atlantic, touching major logistics hubs across the United States where similar patterns of overbuilding followed by demand recalibration are playing out. For communities like the Inland Empire in Southern California, a region synonymous with massive distribution centers serving Los Angeles and Long Beach ports, this UK trend offers a sobering mirror. Here, where warehouses stretch along the I-10 and I-215 corridors from Fontana to San Bernardino, the balance between supply and demand has been shifting for months, and now, the data suggests a broader recalibration may be underway.

According to CoStar’s findings, big-box warehouse availability in the Midlands has declined by approximately 5 million square feet in recent months, driven by stronger occupier demand and a moderating construction pipeline. Despite this drop, overall availability remains historically high at around 30 million square feet—a figure that underscores how deep the prior overbuild went. In the Inland Empire, a comparable dynamic is visible: vacancy rates, which had crept up during the 2022–2023 surge in speculative construction, are now beginning to tighten as leasing activity picks up and new builds sluggish. Grant Lonsdale, senior director of market analytics at CoStar Europe, noted that occupiers are acting with greater urgency, particularly in established distribution locations with strong motorway access—a sentiment echoed by brokers in Southern California who report increased velocity in deals near key interchanges like the I-10/I-15 split in Ontario or the SR-60/I-215 junction in Moreno Valley.

What’s particularly telling is the state of the construction pipeline. In the Midlands, around 70% of big-box space under construction is already pre-letted, sharply limiting near-term availability. At 9.3 million square feet, the current pipeline is 40% smaller than it was two years ago and less than half of its 2022 peak. This mirrors trends in the Inland Empire, where developers have paused or scaled back numerous speculative projects after realizing that rent growth may not justify the risk without secured tenants. Landowners near major logistics anchors—such as the Ontario International Airport air cargo facilities or the BNSF San Bernardino intermodal yard—are finding that tenants are being more selective, favoring buildings with modern clear heights, dock-high loading, and proximity to last-mile delivery corridors. As Lonsdale suggested, this tightening could stabilize incentives and begin shifting leverage back toward landlords, especially those owning high-quality, well-located assets.

The broader takeaway isn’t just about square footage—it’s about market maturity. After years of frenzied development fueled by e-commerce expansion and near-zero interest rates, the industrial sector is entering a phase of discipline. In the Inland Empire, this means less emphasis on sheer volume and more on functional obsolescence: older buildings with low clear heights or inadequate truck courts are seeing longer marketing times, while newer facilities near cross-dock capable rail spurs or within designated foreign trade zones (like those anchored by the Port of Los Angeles’ inland port initiative) continue to draw interest. Second-order effects are emerging too—municipalities like Fontana and Rancho Cucamonga are reassessing warehouse approval criteria, placing greater scrutiny on traffic impacts, diesel emissions, and warehouse buffer zones near residential areas, reflecting a growing awareness that logistics growth must coexist with community quality of life.

Given my background in analyzing commercial real estate trends and translating complex market data into actionable local insights, if you’re navigating this evolving landscape in the Inland Empire—whether you’re a property owner considering repositioning an older asset, a developer evaluating the viability of a new spec build, or a business tenant trying to secure space before conditions tighten further—here are three types of local professionals Try to consult, and exactly what to appear for when hiring them.

First, seek out Industrial Real Estate Brokers with Deep Inland Empire Expertise. Not all brokers understand the nuances of submarkets like the Jurupa Valley/Ontario corridor versus the Redlands/Yucaipa fringe. Look for professionals who actively track vacancy and lease comps through CoStar or similar platforms, can speak knowledgeably about recent transactions near landmarks like the Ontario Mills mall or the San Bernardino International Airport, and have demonstrable experience representing both tenants and owners in build-to-suit and sale-leaseback deals. They should be able to provide a realistic assessment of your property’s functional obsolescence risk and advise on whether renovations—such as increasing clear height to 36 feet or adding ESFR sprinkler systems—would justify the investment in today’s tightening market.

Second, engage Land Use and Zoning Attorneys Familiar with Southern California Logistics Policy. The era of rubber-stamping warehouse projects is over. Cities like Moreno Valley and Perris have implemented stricter environmental review processes under CEQA, often requiring mitigation for truck traffic and particulate matter. A qualified attorney should understand how to navigate site-specific challenges—such as proximity to sensitive receptors near schools in Colton or jurisdictional overlaps involving March Joint Powers Authority—and be well-versed in recent rulings from the Fourth District Court of Appeal that have shaped warehouse approval standards. They should also be fluent in negotiating development agreements that include community benefits like road improvements or air filtration systems for nearby homes.

Third, consider Specialized Industrial Architects or Engineering Firms Focused on Retrofitting Legacy Assets. With vacancy becoming more selective, simply owning a big-box building isn’t enough—it needs to meet modern tenant expectations. Look for firms with proven experience upgrading 1980s–1990s-era concrete tilt-ups in places like Fontana or Rialto: projects that involve adding dock doors, reinforcing floor slabs for heavier fork-lift traffic, installing solar canopies to meet California’s Title 24 energy requirements, or reconfiguring office mezzanines for e-commerce headquarters use. The best practitioners will conduct a thorough site analysis, including seismic evaluation and ADA compliance checks, and provide a phased improvement plan that balances capital expenditure with projected rent uplift.

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