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.