As 2026 heads into its final months, business owners and investors are beginning to get a clearer picture of what their year-end tax liability may look like. A strong year is certainly something to celebrate, but writing a large check to the IRS usually isn’t anyone’s favorite part of the celebration.

For some taxpayers, purchasing commercial real estate before year-end may provide an opportunity to put capital to work, create long-term wealth and potentially generate meaningful tax deductions at the same time.

Instead of simply asking, “How much am I going to owe?”, it may be worth asking another question:

“Is there an opportunity to invest some of that capital into an asset that can benefit me for years to come?”

Commercial Real Estate Has Always Had a Tax Advantage

One of the fundamental advantages of owning income-producing commercial real estate is depreciation.

Although a property may actually increase in market value over time, the tax code generally allows an owner to depreciate the building and other eligible improvements. Nonresidential real property is generally depreciated over 39 years under the Modified Accelerated Cost Recovery System (MACRS).

That annual depreciation expense can potentially offset income generated by the property and, depending on the taxpayer’s individual circumstances, may provide additional tax benefits.

But the building itself is only part of the story.

Cost Segregation Can Accelerate the Benefit

A cost segregation study analyzes the components of a commercial property and identifies assets that may qualify for shorter depreciation schedules instead of treating virtually everything as part of the 39-year building.

Certain electrical systems, flooring, cabinetry, specialty plumbing, equipment, site improvements, landscaping, parking improvements and other components may potentially be classified into shorter-lived categories.

Why does that matter?

Because accelerating depreciation can move deductions that otherwise might be spread over decades into the earlier years of property ownership. For an investor or business owner with significant taxable income, that timing can make a substantial difference.

The IRS itself recognizes cost segregation as a method of identifying property that may qualify for shorter recovery periods and potentially for incentives such as bonus depreciation.

And 100% Bonus Depreciation Is Back

This is where 2026 becomes particularly interesting.

Federal tax legislation enacted in 2025 permanently restored 100% bonus depreciation for qualifying property acquired after January 19, 2025. Under current IRS guidance, eligible property can generally receive a 100% additional first-year depreciation deduction.

Importantly, that does not mean you can deduct 100% of the purchase price of an ordinary commercial building. Land isn’t depreciable, and the portion allocated to the building generally remains subject to the applicable real-property depreciation rules.

However, qualifying shorter-life assets identified through a cost segregation study may potentially be eligible for 100% bonus depreciation.

That combination can make purchasing commercial real estate especially compelling for taxpayers looking at a significant 2026 tax obligation.

A New Opportunity for Certain Production Properties

There is another significant provision business owners should know about.

Certain qualified production property may be eligible for a special 100% depreciation allowance. Generally, this provision applies to qualifying nonresidential real property used as an integral part of manufacturing, chemical production, agricultural production or refining activities.

The rules are specific, and not every industrial building qualifies. But for an owner-user purchasing or developing a facility for an eligible production business, the potential tax implications can be substantial.

This is another reason buyers should involve their CPA and tax advisors early in the acquisition process rather than waiting until after closing.

Don’t Buy a Building Just for a Deduction

Tax benefits can make a good commercial real estate investment better. They generally won’t make a bad investment good.

The fundamentals still matter.

Location. Purchase price. Financing. Rental income. Occupancy. Future rent growth. Building condition. Replacement costs. Exit strategy. And, for owner-users, whether owning the building makes more economic sense than continuing to lease.

A tax strategy should complement a sound real estate strategy—not replace one.

For business owners, purchasing an owner-user property can have benefits extending well beyond depreciation. Instead of paying rent to a landlord every month, the business may be helping pay down an asset owned by the business owner or a related real estate entity. Over time, that can create equity and potentially establish an additional source of retirement wealth.

For investors, commercial property can provide rental income, appreciation potential, leverage and depreciation, all within the same asset.

The Calendar Matters

If you’re considering a purchase for 2026 tax planning, October is a much better time to start the conversation than December 20.

Identifying the right property, negotiating a purchase agreement, completing due diligence, obtaining financing and closing escrow all take time. Tax benefits may also depend on when assets are placed in service, not simply when a purchase agreement is signed.

Waiting until the final weeks of December can severely limit your options.

That’s why the fourth quarter should be viewed as a planning window, not a starting gun.

Before You Write the Check…

If 2026 has been a profitable year, this may be the right time to bring Johnston Pacific on board.

Ask your CPA what your projected tax liability looks like. Determine whether commercial real estate ownership fits your long-term objectives. Discuss depreciation, cost segregation and bonus depreciation with your tax professional. Then determine what type of property makes sense from an investment or operational standpoint.

The objective isn’t simply to spend money to save taxes.

It’s to potentially redirect capital into an asset that can produce income, build equity and create long-term value, while taking advantage of the tax treatment available to you.

At Johnston Pacific Commercial Real Estate, we work with business owners and investors throughout South Orange County to identify commercial properties that fit both their immediate objectives and long-term investment strategies.

If purchasing commercial real estate is already on your radar, don’t wait until December to start looking.

The building you buy in 2026 could do a lot more than house your business or collect rent. It could become an important part of your long-term wealth and tax strategy.

Johnston Pacific Commercial Real Estate
South Orange County Commercial Real Estate Specialists
949-366-2020

This article is provided for general informational purposes only and is not tax, accounting, financial or legal advice. Tax treatment depends on individual circumstances. Buyers should consult their CPA, tax advisor and other appropriate professionals before making an investment or tax-planning decision.

Client: Owner-User / Exotic Automobile Business

Brokerage: Johnston Pacific Commercial Real Estate

Property: 1015 Calle Amanecer, San Clemente, CA

Transaction: Off-Market Industrial Acquisition

The Opportunity

Our relationship with Chas began in 2020, when Johnston Pacific helped him purchase an industrial property for his growing exotic automobile business. That first acquisition gave his company the space it needed to expand while allowing him to begin building equity through commercial real estate ownership.

Over the following years, two things happened: his business continued to grow, and so did the value of his real estate. The substantial appreciation of his original property demonstrated firsthand that owning the building his company operated from could provide benefits far beyond occupancy. Instead of simply paying rent, he was building equity and creating a valuable long-term asset.

The Challenge

Continued business growth meant Chas needed additional space, but finding the right industrial building in San Clemente is rarely simple. The property needed to satisfy his operational requirements while also making sense as a long-term investment.

Rather than wait for the right building to appear on the open market—where he would potentially be competing against multiple buyers—Johnston Pacific went to work behind the scenes.

Johnston Pacific’s Advantage

More than 35 years in the South Orange County commercial real estate market creates relationships, knowledge and access that can’t be replicated by simply searching online listings.

Through our network, Johnston Pacific learned about 1015 Calle Amanecer before the property was publicly offered for sale. We immediately recognized that it closely matched Chas’s requirements and brought the opportunity directly to him.

Our team guided him through the acquisition, negotiated on his behalf and successfully secured the property before it ever reached the open market.

The Results

The acquisition gives Chas something particularly powerful: a property that works for his business today and his financial future tomorrow.

His company now has the additional industrial space necessary to support its continued growth, while Chas has added another quality commercial property to his real estate portfolio. Rather than directing years of occupancy costs toward a landlord, he has the opportunity to build additional equity and benefit from potential long-term appreciation.

His strategy is straightforward: occupy the building today, build wealth through ownership, and ultimately have an asset capable of generating income in retirement.

Conclusion

The purchase of 1015 Calle Amanecer demonstrates why Johnston Pacific views buyer representation as much more than finding a building. We help business owners use commercial real estate as a tool to grow their companies and build long-term wealth.

In this case, a relationship that began with one purchase in 2020 evolved into another off-market opportunity six years later. Our knowledge of Chas’s business, combined with decades of relationships in the local market, allowed us to identify the right property and get him in front of the opportunity before the broader market even knew it existed.

The right building can solve today’s space problem. The right real estate strategy can help fund tomorrow’s retirement.

A recent Wall Street Journal article, “Travel Rx: Getting Away Can Help You Mentally, Research Shows,” highlighted a growing body of research suggesting that travel and vacations can provide meaningful psychological benefits.

That may not sound particularly revolutionary. Most of us already know that sitting on a beach beats sitting in traffic on the 5.

But for business owners, executives and commercial property investors, there’s a more important lesson here: stepping away from the business occasionally may actually make you better at running it.

Your Brain Needs Some Vacancy, Too

Commercial real estate people don’t normally celebrate vacancy. But when it comes to your calendar, a little vacancy might be exactly what you need.

Research increasingly supports the value of vacations and time away from work. A 2025 meta-analysis examining 32 studies found that vacations had a substantial positive effect on employee well-being. Other research has associated vacations with improvements in stress, recovery and psychological well-being.

Travel also does something particularly valuable for people who spend their days solving problems: it changes the environment in which your brain is operating.

New surroundings interrupt familiar routines. You encounter different people, places, foods and experiences. Instead of looking at the same four walls while thinking about the same four problems, your brain suddenly has something new to process.

That psychological distance can help provide something every business owner could use more of; perspective.

When You’re Always “On,” Everything Starts Looking Urgent

Owning a company or commercial property has an interesting side effect: there is almost always something you could be doing.

There’s another lease to review.

Another tenant issue.

Another building improvement.

Another acquisition to analyze.

Another email that apparently cannot survive until tomorrow morning.

The problem is that when everything receives your attention, it becomes increasingly difficult to determine what actually deserves it.

Getting away interrupts that cycle.

Research and clinical observations regarding travel suggest that breaking from familiar surroundings can help people relax, experience new perspectives and create mental distance from everyday responsibilities.

For a business owner, that distance can be remarkably useful.

The solution to a problem you’ve been wrestling with for three weeks may suddenly become obvious while you’re 500 miles away from the office.

You may realize a process is unnecessarily complicated.

You may decide an investment you’ve been chasing isn’t nearly as attractive as you thought.

Or you may finally have enough quiet to think about where you want your company, or your investment portfolio, to be five years from now instead of five days from now.

A Vacation Is Also a Stress Test for Your Business

There is another benefit to getting away that doesn’t get enough attention.

Leaving tests your organization.

If you cannot disappear for a week without the business grinding to a halt, that’s valuable information.

Maybe decisions are too centralized.

Maybe employees need more authority.

Maybe systems haven’t been documented.

Maybe every customer relationship runs through one person.

Or maybe you’re simply answering questions your team is perfectly capable of answering themselves.

A business that requires the owner to personally solve every problem isn’t necessarily efficient. It may simply be dependent.

The same applies to commercial real estate investments.

Good properties should have systems around them: professional management, reliable vendors, appropriate insurance, organized accounting, properly structured leases and experienced advisors.

The objective isn’t to eliminate every problem.

It’s to build an operation where every problem doesn’t require you.

Give Your Team Permission to Get Away, Too

And while you’re booking your own time away, make sure your team gets theirs, too. Vacation shouldn’t be something employees feel guilty about taking, or something they spend answering emails from a hotel room. Time away gives people an opportunity to recharge, reset and return with renewed energy and perspective. For business owners, there is a practical benefit as well: well-rested employees tend to be more engaged, focused and productive than employees who are perpetually running on empty. Encouraging people to actually use their vacation time can also strengthen morale and reinforce that you trust your team to manage responsibilities without everyone being constantly available.

There’s another benefit that business owners sometimes overlook: when one employee takes time off, other people have to step up. Responsibilities get shared, employees learn new functions, weaknesses in processes become visible and you discover whether important knowledge is concentrated with one person. In that sense, vacations can actually make an organization stronger. A company where both the owner and employees can occasionally unplug without everything falling apart is usually a company with good systems, good communication and a capable team.

So when someone on your team says, “I’m taking next week off,” resist the temptation to think about everything that needs to get done while they’re gone.

Tell them to have a great trip.

And mean it.

Don’t Take the Office With You

Of course, physically leaving town isn’t particularly helpful if you bring your entire office along in your pocket.

Checking email before breakfast.

Taking a “quick” call from the pool.

Reviewing a lease from the golf cart.

Sending your property manager a text because you suddenly remembered the parking lot light you’ve been meaning to ask about.

Congratulations. You’ve successfully relocated your office.

For time away to actually work, some degree of detachment matters. Guidance for business leaders taking vacations commonly emphasizes communicating expectations in advance, establishing a trusted point person and planning project timelines around the absence.

In other words: delegate before you disappear.

Your team knows who is responsible for what. Important clients know you’ll be unavailable. Genuine emergencies have a clear escalation path.

Then leave.

The Best Decisions Aren’t Always Made Behind a Desk

Commercial real estate teaches patience.

Properties are long-term investments. Markets move in cycles. Leases span years. Improvements made today may create value for decades.

Business ownership isn’t much different.

Yet it’s remarkably easy to spend 100% of our time reacting to what is immediately in front of us.

Sometimes the best way to see the bigger picture is simply to get farther away from it.

So take the trip.

Go somewhere you’ve never been. Spend a week at the beach. Head to the mountains. Visit another country. Or just take a long weekend somewhere your cell phone doesn’t get particularly good reception.

Your building will probably still be there when you return.

Your business will probably survive.

And that supposedly urgent email?

There’s an excellent chance it will survive too.

At Johnston Pacific Commercial Real Estate, we’ve spent more than three decades helping South Orange County business owners and commercial property investors think long term, about their properties, their investments and the decisions that create lasting value.

Sometimes creating value means knowing when to make a move.

And sometimes it means knowing when to get away.

It’s writing a seven-figure check to the IRS.

After decades of ownership, appreciation has done exactly what you hoped it would. Unfortunately, so has your tax liability.

Too many investors hold properties they no longer want, not because they’re great investments, but because they’re afraid of the tax consequences of selling.

That’s letting the tax tail wag the investment dog.

There Is Another Option.

A Delaware Statutory Trust (DST) allows qualifying investors to complete a 1031 Exchange into professionally managed institutional real estate while continuing to defer capital gains taxes.

Instead of rolling your equity into another property that you have to locate, negotiate, finance, manage, maintain, lease, and eventually sell…

…you can exchange into a diversified portfolio of professionally managed assets that may include:

• Industrial Distribution Facilities
  • Medical Office Buildings
  • Class A Multifamily Communities
  • Self-Storage Facilities
  • Grocery-Anchored Retail Centers

What That Can Mean for Investors

✓ Potentially defer capital gains taxes through a 1031 Exchange

✓ Keep more of your equity invested instead of paying taxes immediately

✓ Eliminate day-to-day property management

✓ Diversify across multiple markets and asset classes

✓ Potential monthly income distributions

✓ Estate planning benefits for many investors

The Biggest Mistake We See

Owners spend years maximizing the value of their property…

…then lose sight of maximizing what they keep.

Selling isn’t the hard part.

Keeping your equity working for you is.

At Johnston Pacific, we’ve spent more than 35 years helping South Orange County commercial property owners maximize the value of their real estate. When it’s time to sell, we help our clients evaluate every available strategy not just finding a buyer, but helping preserve the wealth they’ve spent years creating.

If a sale may be in your future, whether that’s six months or five years from now, the planning should begin before your property goes on the market.

A one-hour conversation today could save months of unnecessary scrambling later.

Thinking about selling? Let’s discuss your options before the IRS decides how much of your equity they’ll receive.

Johnston Pacific Commercial Real Estate, Inc.
South Orange County’s Trusted Commercial Real Estate Advisors Since 1991

949-366-2020

Illustrative equity preserved with a DST (1031 Exchange)

Hypothetical $5M sale assuming a 30% combined tax burden. Example for illustration only.

* Johnston Pacific Commercial Real Estate, Inc. does not provide legal, tax, or investment advice. Delaware Statutory Trust investments involve risks and are not suitable for every investor. Please consult with your CPA, attorney, financial advisor, and qualified 1031 Exchange intermediary before making any tax or investment decisions.

At the center of this recovery is industrial real estate.

While other asset classes are still working through structural or financing headwinds, industrial properties across Orange County continue to attract capital, users, and long-term investors who view this sector as essential infrastructure to the regional economy.

At Johnston Pacific, we’re seeing this play out daily through increased listing activity, more buyer inquiries, and stronger leasing conversations across light industrial, flex, and distribution properties throughout the county.

Why Orange County Industrial Real Estate Continues to Gain Momentum in 2026

Several market forces that began driving investment in 2025 have carried forward — and in some cases strengthened — into 2026.

Transaction Volume Has Continued to Improve

The re-entry of buyers and sellers into the market last year has translated into more consistent deal flow in early 2026. With interest rates finding a more predictable range and lenders showing greater comfort with stabilized industrial assets, deal velocity has improved.

For owners, this means liquidity has returned. Assets that may have sat through 2024 due to bid-ask gaps are now trading as expectations align.

Demand Drivers Remain Structural, Not Cyclical

Industrial real estate in Orange County is supported by long-term trends that extend well beyond market cycles:

• E-commerce and omni-channel logistics still require infill warehouse space near dense population centers
• Nearshoring and supply chain redundancy favor Southern California logistics hubs
• Last-mile distribution needs continue to prioritize proximity over price
• Small-bay and mid-bay spaces remain highly functional for local businesses, contractors, and service users

These are not temporary trends — they are operational realities for tenants that directly support occupancy and rent stability.

Local Fundamentals Are Stabilizing in a Healthy Range

Vacancy has risen from the historic lows of the pandemic boom, but it has stabilized at levels still considered tight by national standards. At the same time, rent growth has moderated into a sustainable range rather than the rapid spikes seen in prior years.

For investors, this is ideal: predictability has replaced volatility.

How Industrial Is Separating Itself from Other CRE Sectors

In 2026, the contrast between industrial and other asset classes is clearer than ever:

• Office continues to face long-term occupancy questions and adaptive reuse discussions
• Retail shows strength in select categories but remains tenant-specific and location-sensitive
• Multifamily is impacted by construction costs, rent control considerations, and tighter development financing

Industrial, by comparison, offers:

• Functional necessity to tenants
• Predictable operating performance
• Lower management intensity
• Strong appeal to both private and institutional investors seeking stability in uncertain rate environments

This is why industrial is often the first sector to recover and the last to soften during market transitions.

What This Means for Investors and Owners in 2026

Pricing Clarity Has Improved

One of the biggest barriers to transactions in 2023–2024 was uncertainty around value. That has largely dissipated. Comparable sales, lender guidance, and buyer expectations are now far more aligned.

This is allowing deals to get done without the prolonged negotiation cycles seen in prior years.

Investor Confidence Is Expanding

Private investors, 1031 exchange buyers, and small funds are actively pursuing Orange County industrial again. Many recognize that pricing today reflects a more rational basis than the peak years, creating attractive long-term entry points.

Niche Industrial Categories Are Attracting Attention

We’re also seeing increased interest in:

• Outdoor storage
• Contractor yards
• Small-bay multi-tenant buildings
• Functional older buildings in prime infill locations suitable for repositioning

These assets often offer higher yield potential with strong tenant stickiness.

How Johnston Pacific Helps Clients Navigate This Market

In a market that has moved from uncertainty to opportunity, strategy matters more than ever.

Market Intelligence & Accurate Valuation

We provide owners with real-time insight into what buyers are actually paying — not just what listings are asking — allowing for precise pricing and positioning.

Transaction Advisory Across Sales and Leasing

From 2,000 SF light industrial condos to 40,000+ SF distribution buildings, we guide clients through acquisitions, dispositions, and leasing with a focus on aligning real estate decisions with operational and investment goals.

Strategic Positioning for Maximum Value

Today’s industrial performance is about access, usability, and tenant demand. We help owners evaluate how their property fits into current tenant requirements and investor expectations.

Key Takeaways for Industrial Stakeholders in Orange County

• Transaction activity that returned in 2025 has carried into 2026 with greater consistency
• Industrial continues to lead all CRE sectors in investor interest and deal flow
• Pricing clarity and lender stability are enabling more transactions
• Vacancy and rent growth have normalized into a healthy, sustainable range
• Well-located, functional industrial properties remain highly sought after

Conclusion: Industrial Remains the Cornerstone of Orange County CRE

As the broader commercial real estate market continues to recalibrate, industrial property stands out as the sector defined by utility, durability, and long-term demand.

For owners, this is a window where liquidity, pricing clarity, and investor appetite align.

For investors and occupiers, this is an environment where strategic decisions made today can pay dividends for years to come.

If you’re evaluating a sale, acquisition, lease, or portfolio strategy, Johnston Pacific can help you capitalize on the opportunities emerging in 2026.

Ready to Plan Your Next Move?

Whether you’re:

• Exploring an industrial acquisition
• Considering selling a property
• Weighing leasing vs. owning
• Or seeking an updated valuation of your asset

Let’s talk strategy. 949-366-2020

We’re doing something new in the second half of 2026! Starting in May of this year, we started sending out letters celebrating the anniversary of your building purchase, our team at Johnston Pacific Commercial Real Estate prepares something that often generates surprised phone calls.

Not because there’s a problem.

Because many owners have no idea how much their property has increased in value.

If you’ve recently received one of our Property Value Growth reports, you know exactly what we’re talking about. The report compares what you paid for your building to its estimated value in today’s market and illustrates the growth your investment has experienced since purchase.

Some owners see a modest increase.

Others discover they’ve accumulated hundreds of thousands, or even millions, of dollars in additional equity.

And almost all of them ask the same question:

“Is my building really worth that much?”

Commercial Real Estate Is Often the Largest Asset You Own

Many business owners closely monitor their bank accounts, retirement plans, investment portfolios, and operating expenses.

Yet surprisingly few track the value of the building they own.

That can be a costly oversight.

For many owner-users and investors, commercial real estate represents one of the largest assets on their balance sheet. Unlike stocks, however, there isn’t a ticker symbol flashing across a screen every day telling you what your property is worth.

As a result, years can pass without an owner having a clear understanding of how their investment has performed.

That’s exactly why we created our annual Property Value Growth reports.

The Results Often Surprise Owners

We’ve seen countless examples throughout South Orange County where property values have significantly outperformed owners’ expectations.

A building purchased five years ago may have appreciated by 40%, 60%, or even more depending on location, property type, and market conditions.

In some cases, owners who purchased industrial properties only a few years ago are sitting on substantial equity gains that they never anticipated.

Many are shocked to learn that the wealth created by their building has exceeded the returns generated by other investments they actively monitor every month.

The reality is that commercial real estate has quietly created significant wealth for many South Orange County property owners over the past decade.

Why Have Values Increased?

Several factors continue to support property values throughout the region.

Limited Supply

One of the biggest drivers of appreciation is simple economics.

There are only so many industrial and commercial buildings available, particularly in South Orange County. With limited land available for new development, existing properties continue to benefit from constrained supply.

Strong Business Demand

Companies still need space to operate, manufacture, distribute products, and serve customers.

Well-located commercial properties remain highly desirable, creating competition among both users and investors.

Rising Construction Costs

The cost of building new commercial buildings continues to rise.

Land acquisition, labor, materials, permitting, and development fees have all increased substantially over the past several years. As replacement costs rise, existing buildings often become more valuable.

Increasing Rental Rates

Strong rental growth has also contributed to higher values.

Whether an owner occupies the building themselves or leases it to tenants, rising rental rates help support higher valuations throughout the market.

Why Knowing Your Value Matters

Many property owners assume valuation only matters when they decide to sell.

In reality, understanding your property’s current value can help guide numerous business decisions.

It may influence:

• Refinancing opportunities
• Estate planning strategies
• Partnership decisions
• Future acquisitions
• 1031 exchange planning
• Expansion plans
• Retirement planning

Even if you have no intention of selling, understanding the current value of your real estate helps you make better long-term decisions.

The Cost of Not Knowing

One of the biggest mistakes we see is owners operating on outdated information.

An owner who believes their property is worth what it was worth five years ago may miss opportunities to leverage equity, refinance advantageously, acquire additional assets, or reposition their investment strategy.

Commercial real estate markets change.

Values change.

Opportunities change.

The owners who stay informed are generally the ones who make the best decisions.

More Than Just a Number

Our Property Value Growth reports aren’t intended to encourage owners to sell.

In fact, many recipients have no intention of selling at all.

The purpose is to provide insight.

When you understand what your building is worth today, you gain a clearer picture of your financial position and the opportunities available to you moving forward.

After all, you wouldn’t ignore the value of your stock portfolio for five years.

Why ignore the value of one of your largest assets?

Our Commitment to Property Owners

For more than 35 years, Johnston Pacific Commercial Real Estate has helped South Orange County property owners maximize the value of their investments.

The annual Property Value Growth report is simply one way we help our clients stay informed about their assets and the market around them.

If you haven’t received a recent valuation update, or if you’re curious about how your property’s value has changed since you purchased it, we’d be happy to prepare a confidential analysis.

You may be surprised by what your building is worth today.

And that’s a phone call we always enjoy making.

Don’t hesitate to reach out, 949-366-2020

One of the most impactful changes is the new ability to “couple” SBA 7(a) and SBA 504 financing together.

As of May 2026, the SBA has officially increased the combined SBA 7(a) and SBA 504 lending limit to $10 million, effectively doubling previous cumulative borrowing capacity. According to the latest lending update, the current SBA 504 rate is approximately 5.95%, while the 10-Year Treasury Constant Maturity Rate is 4.59%.

Here’s why that matters:

Previously, many borrowers would max out their SBA eligibility after a single large transaction.

Under the new structure, qualified borrowers may now access:
• Up to $5 million through the SBA 7(a) program
• PLUS up to $5 million through the SBA 504 program
• For a combined total of $10 million in SBA-backed financing

The SBA is also decoupling certain 7(a) balances from the 504 program, allowing businesses to leverage both loan products more strategically for expansion, equipment purchases, real estate acquisitions and working capital.

This creates substantial new opportunities for:
Manufacturers
Medical & life science companies
Aerospace & defense contractors
Logistics and distribution companies
Multi-location operators
Commercial real estate investors

For growing businesses, this may now make purchasing a facility far more achievable than many previously believed possible.

For commercial property owners, this potentially expands the buyer pool significantly,  especially for owner-user industrial and office properties.

At Johnston Pacific Commercial Real Estate, we are already seeing increased activity from companies evaluating expansion plans, acquisitions and long-term ownership opportunities throughout South Orange County’s industrial market.

With inventory remaining tight and financing capacity increasing, we believe this could become a major catalyst for owner-user demand in the months ahead.

If you would like to discuss:
• Owner-user acquisition opportunities
• Current market values
• Off-market industrial properties
• Expansion strategies
• Sale-leaseback structures
• Investment acquisitions

Access to capital creates opportunity, and this latest SBA change could be one of the most impactful financing shifts commercial real estate has seen in years.

Johnston Pacific Commercial Real Estate, Inc.
Experts at finding your perfect commercial property investment.

1. Industrial Market Fundamentals: Normalization, Not Collapse

Industrial real estate across the U.S. is no longer in the white-hot growth phase of the early 2020s. Vacancy nationally has risen from historic lows and is generally stabilizing in the mid-6% to low-7% range, a trend supported by major research firms.

In Southern California, industrial vacancy rates have increased but remain below peak levels seen elsewhere. Negative net absorption in Orange County has been reported, though some metrics point toward stabilization rather than deterioration.

Leasing activity has shifted: tenants prioritize functional, modern logistics space over older, less efficient properties, a dynamic that preserves underwriting strength for quality assets.

Implication for Lending:
Lenders are pricing for normalization, not distress. Underwriting models increasingly emphasize realistic stabilization assumptions and tenant quality, especially for properties with strong logistics demand.

2. Credit Environment: Tighter Underwriting, Spreads Narrowing

Commercial lending standards remain selective but have softened modestly for industrial product relative to other CRE sectors. Institutional financing spreads for industrial loans have narrowed in early 2026, though they are still above the extremely low spreads seen earlier in the decade.

Traditional banks remain cautious in underwriting, often requiring:

• Strong debt service coverage ratios (DSCR)
• Lower loan-to-value (LTV) ratios
• Stable rent and occupancy projections

Community banks and credit unions still play a role for smaller industrial assets — particularly mid-bay and small-bay properties — albeit with conservative terms.

Implication for Lending:
Selective expansion of credit for stabilized, core industrial assets is evident, while construction and speculative financing still face tighter scrutiny due to rate-linked risk and uncertainty.

3. Alternate Capital Sources: Private Credit and Non-Bank Lenders

In a world where some traditional banks remain conservative, private credit, life companies, and specialty finance providers are stepping in to fund transitional, value-add, or non-stabilized industrial projects. These lenders typically offer:

• Higher loan-to-cost (LTC) or loan-to-value (LTV) structures
• Short-term bridge financing
• Flexible underwriting for redevelopment or repositioning plays

However, these come at higher pricing and often shorter terms, so sponsors must match financing type to strategy.

Implication for Lending:
Private capital fills gaps but demands sharper risk justification and often favors projects with clear operational value or strong exit paths.

4. Pricing, Rates, and Spread Dynamics

Interest rates remain elevated relative to the decade’s historical lows. While the Federal Reserve’s pivot in 2025 eased pressure modestly, borrowing costs for CRE remain elevated enough to factor meaningfully into underwriting.

Typical pricing for quality industrial deals often reflects spreads that embed term risk, tenant credit, and submarket strength. This dynamic necessitates:

• Realistic rental growth assumptions
• Conservative cap rate projections
• Pricing that accounts for rate uncertainty over longer loan tenors

Implication for Lending:
Pricing discipline persists, lenders are willing to lend but want terms that align risk with expected cash flow fundamentals.

5. Local Orange County Indicators and Investment Activity

Locally, Orange County industrial transaction activity underscores ongoing demand. Recent land and portfolio transactions show investors still confident in long-term fundamentals despite broader market normalization:

• Recent industrial site acquisition and redevelopment plans in Anaheim highlight continued interest in supply-constrained infill assets.
• Fully leased industrial portfolios are trading, showing that stabilized cash flows remain attractive.

Meanwhile, regional forecasts suggest that broader CRE financing clarity is improving as markets transition from uncertainty to measured stabilization.

Implication for Lending:
Orange County’s inherent supply constraints and logistics demand give lenders confidence in quality industrial deals, even as underwriting standards remain deliberate.

6. What to Expect Through Late 2026

Looking ahead through the rest of 2026, several themes are likely to shape the commercial industrial lending landscape in Orange County:

• Disciplined but consistent financing for quality assets with strong tenant credit and occupancy histories
• Continued importance of detailed underwriting focused on realistic lease-up and stabilization scenarios
• Ongoing role for private capital in transitional plays, value-add financing, and gap lending
• Cautious expansion of institutional banks into larger portfolios and build-to-core strategies as risk models adjust
• Focus on modernization and efficiency as occupiers and lenders both value functional industrial space

In essence, the lending market is not static — it is adapting to stabilization and select pockets of opportunity rather than reverting to aggressive growth or freeze.

Bottom Line

The 2026 industrial lending environment in Orange County continues to evolve. Capital remains available for quality, well-underwritten industrial assets, and traditional lenders are slowly expanding their comfort zones — particularly for stabilized properties with demonstrable tenant demand. At the same time, alternate capital sources provide strategic flexibility, though often at a cost.

For investors and developers, success hinges on strong underwriting narratives grounded in credible market fundamentals, realistic projections, and an understanding of both traditional and alternative financing channels.

Let Johnston Pacific’s 35 years of expertise work for you, give us a call today at 949-366-2020 to discuss your investment opportunities.

For investors and owner-users in Southern California, particularly Orange County’s industrial market, this data reinforces what seasoned professionals already know: well-located, functional industrial assets remain one of the most resilient and in-demand property types. At Johnston Pacific Commercial Real Estate, we see this trend playing out daily on the ground, supported by more than 35 years of experience in the South Orange County industrial market.

CRE Executives Are Leaning Back Into Growth

Deloitte’s survey gathered insights from hundreds of senior CRE executives worldwide, including CEOs, CFOs, and investment leaders overseeing portfolios valued at hundreds of millions—or billions—of dollars. The headline finding is clear: roughly three-quarters of respondents plan to increase their real estate investment allocations in 2026.

This shift marks a meaningful change from the cautious stance many investors adopted over the past two years. While challenges remain, executives now see pricing adjustments, motivated sellers, and long-term demand fundamentals as reasons to re-enter the market strategically rather than sit on the sidelines.

Why Industrial Real Estate Continues to Lead

Among all asset classes, industrial commercial real estate stands out as a top investment priority, both globally and locally. Deloitte’s findings echo a broader market reality: logistics, manufacturing, warehousing, and flex industrial properties are benefiting from structural demand drivers that extend far beyond short-term economic cycles.

Key drivers include:

• Continued reshoring and nearshoring of manufacturing
• E-commerce and last-mile delivery growth
• Supply chain reconfiguration
• Limited new industrial land availability in infill markets

In Orange County and South Orange County, these pressures are even more pronounced. Industrial inventory remains constrained, zoning is restrictive, and replacement costs continue to rise, factors that help support long-term asset value and rent stability.

At Johnston Pacific, we specialize exclusively in industrial and commercial properties, allowing us to guide clients toward buildings that align with operational needs, growth plans, and long-term investment objectives.

Executives Are Targeting Value, Not Just Volume

Deloitte’s survey also highlights a critical nuance: while investment activity is increasing, capital is being deployed more selectively. CRE leaders are prioritizing assets with strong fundamentals, functional layouts, and long-term relevance.

In practical terms, this means:

• Favoring well-located industrial buildings over speculative development
• Seeking properties with clear exit strategies
• Targeting markets with proven tenant demand

This disciplined approach mirrors how Johnston Pacific advises clients. Whether representing buyers, sellers, or owner-users, our focus is on matching the right building to the right business, not simply chasing deals.

Capital Is Evolving, And Opportunity Comes With It

One challenge noted in Deloitte’s findings is access to traditional financing. While banks remain cautious, many CRE executives are successfully navigating the environment through private capital, joint ventures, and alternative lending sources.

This evolving capital landscape creates opportunity, particularly for buyers who understand deal structure and timing. In Southern California, we’re seeing:

• Increased seller flexibility
• Creative financing solutions
• Off-market opportunities driven by relationships

With decades of local market experience, Johnston Pacific helps clients navigate capital constraints, negotiate effectively, and uncover opportunities others miss.

 Technology and Data Are Shaping Smarter CRE Decisions

Another theme from Deloitte’s survey is the growing role of technology and data-driven decision-making in commercial real estate investment. CRE executives are increasingly using analytics, market intelligence, and forecasting tools to guide acquisitions and leasing strategies.

At the local level, this reinforces the value of working with a brokerage that understands not just data—but how to interpret it within a specific submarket. Johnston Pacific combines market analytics with first-hand knowledge of:

• Tenant demand trends
• Real-time leasing velocity
• Submarket pricing nuances
• Building-specific functional advantages

Data may inform decisions, but local expertise closes deals.

What This Means for Industrial Investors in Orange County

Deloitte’s global survey confirms what we see firsthand: commercial real estate investment momentum is returning, and industrial properties remain at the center of that resurgence.

For Orange County investors, this means competition will increase, but so will opportunity. Those who move strategically, understand local conditions, and align with experienced advisors will be best positioned to succeed.

Whether you are:

• Acquiring industrial property
• Selling or repositioning an asset
• Leasing space for your business
• Planning a long-term investment strategy

Timing, insight, and execution matter more than ever.

Why Johnston Pacific

For over 35 years, Johnston Pacific Commercial Real Estate has been a trusted name in South Orange County industrial real estate. Our business is built on relationships, market knowledge, and a clear focus on delivering results for our clients.

As Deloitte’s survey makes clear, confidence is returning to commercial real estate, but success will favor those who act with precision and purpose.

If you’re considering an industrial real estate move in 2026, Johnston Pacific is here to help you navigate the market, identify opportunities, and secure the right property for your goals.

Contact Johnston Pacific Commercial Real Estate today at 949-366-2020 to discuss how today’s market trends can work in your favor.

Below is a practical guide to upgrading your industrial commercial property while it is between tenants, with a focus on improvements that deliver the highest return and shorten downtime.

Start With the Basics: Fix What Can Kill a Deal

Before discussing enhancements, it is critical to address deferred maintenance. Sophisticated tenants will walk away quickly if they see unresolved issues that signal risk or future expense.

Common high-priority items include:

• Roof leaks or ponding areas
• Failing HVAC units or inadequate ventilation
• Electrical panels that are outdated or undersized
• Plumbing leaks or poor restroom conditions
• Exterior concrete cracks or drainage issues

Leaks, in particular, should never be ignored. Water intrusion damages inventory, equipment, and tenant confidence. A clean roof inspection report or recent repairs can remove a major objection during tours and speed up lease negotiations.

Addressing these fundamentals first creates a stable foundation for higher-impact upgrades.

Upgrade to LED Lighting: One of the Highest ROI Improvements

LED lighting has become an expectation rather than a luxury in modern industrial facilities. Upgrading outdated fluorescent or metal halide fixtures deliver immediate benefits.

Advantages of LED lighting include:

• Lower energy consumption and utility costs
• Brighter, more uniform lighting in warehouse areas
• Reduced maintenance due to longer fixture life
• Improved safety and productivity for employees

For owners, LED upgrades are attractive because they are relatively inexpensive compared to structural improvements and are easy to highlight in marketing materials. Many tenants now ask about lighting efficiency early in the tour process, especially those operating multiple shifts or energy-intensive operations.

If budget allows, consider motion sensors or daylight harvesting in warehouse and exterior areas to further enhance efficiency.

Flooring Improvements: Polish, Seal, or Replace

Flooring is one of the most overlooked yet impactful elements of an industrial property. Between tenants is the ideal time to address it without disrupting operations.

Depending on the condition and use case, options include:

• Polishing existing concrete to improve appearance and durability
• Sealing floors to reduce dust and staining
• Repairing cracks, spalling, or uneven surfaces
• Installing specialized coatings for heavy manufacturing or automotive uses

Clean, smooth floors make a strong first impression during tours and reduce objections from tenants concerned about equipment placement or forklift operations. In automotive or high-traffic environments, upgraded flooring can be a deciding factor.

EV Charging Stations: Future-Proofing Your Asset

Electric vehicle adoption continues to accelerate, and industrial tenants are beginning to factor EV infrastructure into site selection. While not every tenant requires EV charging today, installing charging stations can future-proof your property and differentiate it from competing buildings.

Benefits include:

• Appealing to fleet-based tenants transitioning to electric vehicles
• Supporting employee EV charging, a growing workplace expectation
• Enhancing ESG credentials for institutional or corporate tenants

Even installing conduit and electrical capacity for future chargers can be a smart compromise if full installation is not feasible immediately. This signals foresight and flexibility to prospective tenants.

Improve Electrical Capacity and Power Distribution

Power requirements are increasing across many industrial uses, from advanced manufacturing to automotive and cold storage. Insufficient electrical capacity is one of the fastest ways to lose a qualified tenant.

Between tenants, consider:

• Upgrading electrical panels or transformers
• Adding additional outlets or drops in warehouse areas
• Improving power distribution for flexibility in tenant layouts

These improvements are easier and less costly to complete when the building is vacant and can significantly expand the pool of viable tenants.

Refresh Office and Common Areas

While warehouse functionality drives most industrial leasing decisions, office areas still matter. A dated or worn office space can create friction, especially for owner-users or customer-facing businesses.

Cost-effective office upgrades include:

• Fresh paint with neutral, modern colors
• New flooring or carpet tiles
• Updated lighting and ceiling tiles
• Refreshed restrooms and break areas

These upgrades help to position the building as move-in ready and reduce tenant improvement negotiations.

Exterior and Curb Appeal Still Count

First impressions begin in the parking lot. Simple exterior upgrades can dramatically improve how a property shows.

Focus areas include:

• Power washing exterior walls and walkways
• Restriping parking and loading areas
• Updating landscaping with low-maintenance plants
• Repairing or repainting roll-up doors and entry doors

A clean, well-maintained exterior signals professionalism and pride of ownership, setting the tone before a prospect ever steps inside.

Think Strategically About Return on Investment

Not every upgrade makes sense for every property. The key is to align improvements with the most likely tenant profile and the realities of your submarket. In tight industrial markets, strategic upgrades can justify higher asking rents and shorten vacancy periods. In softer conditions they can be the difference between leasing quickly or sitting idle.

Working with a broker who understands tenant demand, pricing thresholds, and competitive inventory can help prioritize where capital will have the greatest impact.

Final Thoughts

The time between tenants is not dead time. It is an opportunity to reposition your industrial asset, reduce future headaches, and attract strong, longer-term occupants. By addressing maintenance issues, upgrading lighting and flooring, planning for EV infrastructure, and enhancing overall functionality, owners can turn vacancy into a value-creating phase.

For industrial property owners in Orange County, thoughtful upgrades completed at the right time often deliver returns well beyond their initial cost.

If you are evaluating whether to lease, sell, or reposition your industrial property, Johnston Pacific Commercial Real Estate brings more than 35 years of experience in the South Orange County industrial market. Our team can help you determine which upgrades make sense, how they impact value, and how to position your property for maximum exposure and results.