2025 was Progressive Real Estate Partners’ best year. When both the leasing and sales teams perform this well, it naturally raises the question: were we simply riding a favorable current, or did we succeed while fighting the flow of the river?
In this case, there is no doubt that the team’s experience, knowledge, and effort contributed substantially to our success. But if we were paddling upstream, the river was at least relatively calm and not racing against us.
To test this observation, I took one of the deepest dives ever into the Inland Empire (including the Coachella Valley) and Eastern San Gabriel Valley retail markets. These are the markets where Progressive Real Estate Partners conducts over 80% of its leasing and sales activity, so understanding them is essential.
Retail demand is heavily influenced by employment, population growth, and income growth. To better understand these drivers, my analysis included demographic trends, industrial and office market statistics, and housing data. A substantial portion of the data comes from Costar; additional sources are listed at the end of this article.
Here are the key findings to help you navigate investment and business decisions in the coming year.
Demographics
California faces meaningful headwinds, including out-migration of businesses and residents, reduced immigration into the state, and an aging population combined with lower birth rates. Despite these pressures, the Inland Empire continues to grow, although per the data below, not at the pace of the past couple of decades.
Inland Empire Population Growth
| 2000–2010 | 4,242,365 | 29.44% |
| 2010–2020 | 4,608,189 | 8.62% |
| 2020–2025 | 4,744,214 | 2.95% |
Even with this more subdued growth, the region is still expanding faster than the state of California. Without material policy changes at both the state and federal level, modest population growth appears to be the most reasonable expectation.
Inland Empire Median Income Growth
| Year | San Bernardino County | Riverside County | Combined MSA | % Change from prior 5 years |
| 2010 | $52,323 | $60,586 | $57,420 | — |
| 2015 | $55,372 | $64,994 | $61,690 | 7.4% |
| 2020 | $67,903 | $83,456 | $76,955 | 24.75% |
| 2025 | $87,513 | $94,138 | $90,870 | 18% |
Median incomes have accelerated, but they have not kept pace with the region’s 28% inflation rate between 2020 and 2025. Slower population growth combined with incomes that lag inflation is clearly squeezing certain consumer segments. We are anecdotally hearing from the retail community that retailers are being more cautious especially in middle to lower income trade areas.
Industrial Market Overview
The industrial market is a major engine for both residential and job growth and therefore a critical driver of retail performance. This influence extends from construction jobs during development to the long-term employment created by businesses that buy or lease these facilities.
The industrial market has softened significantly over the past few years. The industrial availability rate has increased from 3.06% in the fourth quarter of 2021 to 11.2% today, driving an average lease rate decline of about 23% since the third quarter of 2023.
On a 915 million square foot base, an eight-point rise in availability equates to roughly 73 million additional square feet of space, which translates to an estimated 10,000 to 15,000 direct jobs lost and roughly double that when including indirect jobs.
This increase in availability and decrease in rents has sharply curtailed construction, with space under construction dropping from 45 million square feet in 2022 to 12.1 million square feet today. Over the past 12 months, deliveries have been at their lowest level in a decade, and for every 10 million square feet reduction in construction, an estimated 8,000 to 12,000 construction jobs are lost.
Inland Empire Industrial Development and Availability Rate
| Year | Under construction | Availability rate | Avg. lease rate |
| 2020 | 20,912,090 SF | 4.8% | $0.87/SF |
| 2021 | 33,952,109 SF | 3.1% | $0.93/SF |
| 2022 | 45,302,654 SF | 5.6% | $1.24/SF |
| 2023 | 32,524,164 SF | 9.6% | $1.43/SF |
| 2024 | 16,616,592 SF | 10.4% | $1.23/SF |
| 2025 | 12,118,131 SF | 11.2% | $1.13/SF |
Office Market Overview
For those expecting an office horror story or a “turnaround” narrative, the reality in the Eastern San Gabriel Valley and Inland Empire is very different. Over the past decade, including the Covid era, these office markets have performed remarkably well, and the Inland Empire has one of the lowest vacancy rates among the top 50 MSAs in the country.
The current office vacancy rate is only 5.1% on a base of 99 million square feet. There has been virtually no new construction over the past 20 years and very little is expected in the near term, as current lease rates still do not justify new development despite the low vacancies.
If demand remains steady or improves, lease rates are likely to move up meaningfully in certain submarkets. According to Costar, there are 2,172 available spaces, but only 34 are larger than 30,000 square feet, consistent with a market dominated by small and mid-size users, with large occupiers primarily in government-related sectors.
The strength of the office market has been a very positive indicator especially for retailers and restaurants that are near these job-generating locations.
Housing: prices and construction
At least 20 years ago, an economist focused on the Inland Empire said the number one indicator he watched as it relates to the retail marketplace was whether home values were moving up or down. His reasoning was that when home values rise, people feel better and spend more. When homes are increasing by tens of thousands of dollars per year, people feel more comfortable making large purchases, especially home-related investments, and that “wealth effect” has historically helped drive retail spending.
If that same economist were looking at today’s market, he would probably urge caution for those in the retail sector. For the 12 months ending November 30, 2025, the Inland Empire median home sold for $585,000, down 2.5% from a year earlier, which is slightly better than the 3.9% decline statewide and 2.6% decline in the Los Angeles metro. Total sales in the Inland Empire were roughly flat year-over-year.
A November report by the California Association of Realtors shows increasing inventory to a 3.6‑month supply, more listings, and softening demand.
New home construction, however, has been remarkably steady over the last decade, ranging between roughly 8,000 and 12,000 units per year. In Riverside County, the bulk of new construction has occurred in Menifee, Eastvale, Beaumont, Murrieta, Temecula, and Perris, while in San Bernardino County, the growth has been concentrated in Fontana, Ontario, Rialto, Victorville, and Hesperia. These are generally the same areas where most new retail development has occurred in recent years.
Retail market conditions
The San Gabriel Valley and Inland Empire retail markets remain relatively healthy, but we are checking often for potential shifts. With limited residential growth, most new leasing involves backfilling second-generation space, and tenant expansion often focuses more on reshuffling existing retail dollars than on serving new population.
Vacancy
Retail vacancy reached a 20‑year low of 5.2% in the fourth quarter of 2023 and has since inched up to 6.4%. That increase represents roughly 3 million additional square feet on the market, much of which is junior-box to big-box space formerly occupied by tenants such as 99 Cents Only Stores, Big Lots, Rite Aid, Joann Stores, and Forever 21.
If the 5.5 million square feet of space 20,000 square feet and larger is excluded, the vacancy rate drops to 4.6%. Shop space under 2,500 square feet remains very tight, and quality spaces continue to lease quickly.
From day-to-day observation, the lack of vacancy is often striking. Over more than 30 years working this market, there have been long stretches with far more empty shop space than there is today, and many mediocre centers are currently 100% occupied, underscoring the continued strength of the market.
The space that lingers tends to be in older centers, tertiary locations, awkward configurations, or spaces burdened by too many exclusives and prohibited-use clauses. In contrast, most well-located shop spaces—especially those with restaurant improvements—are in high demand, and spaces with a functioning “hood and a grease trap” are particularly desirable.
New retail construction
New construction is often a point of curiosity, but on a 247 million square foot base, an average of about 1 million square feet of new space per year over the past decade barely moves the needle. There is little reason to expect this pace to accelerate, given high construction costs, tenant resistance to the rents needed to justify new development, and the limited need for additional retail in most markets.
That said, some notable projects and tenants have opened or are opening:
- Target and Burlington at the newly built Shops at Jurupa Valley
- Stater Bros. and Costco in Highland
- Sprouts in Apple Valley
- A 171,000 SF Walmart in Eastvale (opening this month)
Other brands that have opened multiple locations across the region in 2025 include AutoZone, Del Taco, Dutch Bros, In‑N‑Out, Jack in the Box, McDonald’s, Panda Express, Panera Bread, Pollo Campero, Quick Quack Car Wash, and Starbucks.
Leasing activity
Leasing activity in 2025 slightly exceeded 2020, with 4.5 million square feet leased. 2020 had the least amount of leasing activity in the past decade. Volume in 2025 was not enough to offset the space that came back on the market, resulting in higher overall vacancy.
From 2015 to 2019, leasing activity averaged 6.7 million square feet per year, compared to 5.35 million square feet per year from 2021 to 2025. This decline shows a slower, but still active, leasing environment.
Lease rates
Understanding retail lease rates is always tricky for several reasons:
- No two spaces are truly comparable; factors such as age, co‑tenancy, access, and visibility can create wide rate differences even across the street.
- Asking lease rates are often not posted on platforms like Costar, Loopnet or Crexi because most brokers require direct inquiries, often at landlords’ request to avoid broad rate visibility, especially to their existing tenants.
- Even when completed lease transaction lease rates are advertised, triple‑net charges, tenant improvement allowances, premises condition, and free rent are rarely fully disclosed.
This is where having a brokerage company that completes 100+ retail leases per year is invaluable. Anecdotally, many spaces in 2025 achieved lease rates above what they would have obtained in prior years, though this was far from universal.
Over the past five years, triple‑net charges are estimated to have risen by about 25% on average, making higher overall occupancy costs harder for tenants to absorb and complicating base‑rent growth in many locations.
We are still frequently seeing new lease rates exceeding prior years lease rates, but we are seeing more resistance in the market for higher lease rates.
Investment Sales and Cap Rates
When analyzing sales volume, the focus here is on transactions between $1 million and $20 million. This excludes portfolio deals and the occasional very large transaction that can distort averages.
Sales volume in 2025 reached $1.8 billion, 7.6% higher than 2024 and very much in line with the 10‑year average of $1.88 billion. The market appears to have returned to a normally functioning state.
That $1.8 billion in volume was spread across 366 sales:
Inland Empire and E. San Gabriel Valley Sale Distribution
| Price point | Number of sales | Share of total |
| $10M–$20M | 10 | 2.7% |
| $5M–$9.99M | 58 | 15.8% |
| $2M–$4.99M | 176 | 48.2% |
| $1M–$1.99M | 122 | 33.3% |
Anecdotally, in 2025 more than half of our company’s sale transactions closed without the buyer using any debt.
Single-Tenant vs. Multi-Tenant
There were approximately 55% more single-tenant transactions than multi-tenant transactions this past year. This reflects the ongoing shift toward developing single-tenant properties and then selling them to capture profit, rather than building multi-tenant centers.
Single Tenant vs. Multi-Tenant Investment Sale Metrics
| Metric | Single-tenant | Multi-tenant |
| Cap rate | 5.6% | 6.2% |
| Sales price/SF | $461/SF | $251/SF |
| Average price | $3.9M | $4.0M |
Within the single tenant and multi-tenant market there is a wide range of cap rate distribution based upon numerous factors including, but not limited to, location, quality of tenant mix, property age, architecture, number of tenants, and price point.
Even with taking out the outliers, the cap rate distribution range for single tenant was 4% to 8% while the distribution rate for multi-tenant was 4.5% to 8%. This is further evidence that there are no rules of thumb these days and that it takes a very knowledgeable broker to properly price an investment sales asset.
Conclusion
As 2026 unfolds, the Inland Empire and Eastern San Gabriel Valley retail markets present a landscape of measured opportunity amid broader economic headwinds. Progressive Real Estate Partners remains committed to leveraging deep local expertise, disciplined data analysis, and relentless execution to help clients navigate subdued population and income growth, softening industrial momentum, and stable-but-cautious housing trends—while capitalizing on the enduring tightness in shop space, resilient office performance, and a normalized sales environment. With vacancy low, quality assets in demand, and our team stronger than ever, the path forward favors those who paddle smartly with the current rather than against it.
Data Sources:
- Costar
- California Association of Realtors
- St. Louis Federal Reserve
- United States Census Bureau
- California Department of Finance
- ESRI