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• Electrical panels that are outdated or undersized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 Upgrading outdated fluorescent or metal halide fixtures deliver immediate benefits.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.

We increased our clients cash flow by $42m in 2025. This is one of the ways Johnston Pacific did it.

Client: Industrial Building Owner

Brokerage: Johnston Pacific Commercial Real Estate, Inc

Property: 5,406 sq ft. industrial building at 230 Calle Pintoresco, San Clemente, CA

Transaction: 5-Year Industrial Lease

Property Overview

230 Calle Pintoresco is an industrial property located in the Rancho San Clemente Business Park. While well maintained, the building faced a major challenge in today’s industrial leasing market: nearly 60% of the space was configured as office, making it unattractive to most warehouse, manufacturing, and distribution users.

In a market where tenants prioritize functionality, clear space, and efficient layouts, the property’s heavy office build-out significantly limited demand.

The Challenge

Despite being in a desirable location, the building struggled to gain traction because its layout did not match what modern industrial tenants were seeking.

Key obstacles included:

• Excessive office space relative to warehouse area
• A mezzanine structure that restricted usability and flexibility
• Limited appeal to core industrial users
• Reduced competitiveness compared to nearby properties

Many owners in this situation attempt to lease “as-is,” resulting in extended vacancy, downward pressure on rent, and missed opportunities.

Johnston Pacific’s Strategic Guidance

Rather than simply marketing the space, Johnston Pacific took a consultative, data-driven approach.

After analyzing tenant demand and market trends, our team identified that the property’s layout, not its location or condition, was the primary barrier to leasing.

We advised the owner to:

• Dismantle the mezzanine structure
• Reduce the oversized office footprint
• Rebalancing the space toward warehouse and production use
• Reposition the property to align with active tenant requirements

This recommendation required upfront investment. However, it was based on our deep knowledge of the South Orange County industrial market and our experience with what truly drives leasing velocity.

The owner trusted our expertise and executed the recommended improvements.

Execution & Repositioning

Once the mezzanine was removed and the space was reconfigured:

• The property became more versatile
• Prospective tenants could envision immediate occupancy
• The building compared favorably with competing inventory
• Marketing momentum increased significantly

Johnston Pacific then relaunched the property with a refined positioning strategy, targeting qualified industrial users actively seeking functional space.

Results

The impact was immediate and measurable.

• The property was successfully leased on a 5-year term
• Vacancy risk was eliminated
• Long-term income stability was secured
• The owner avoided prolonged downtime and rent concessions
• The building’s market perception shifted from “challenging” to “competitive”

By following Johnston Pacific’s guidance, the owner transformed a difficult-to-lease asset into a stabilized, income-producing investment.

Why Johnston Pacific Delivers Results

This transaction exemplifies what sets Johnston Pacific apart.

We don’t just list properties.
We analyze, advise, and execute strategies that maximize performance.

Our approach includes:

• In-depth market intelligence
• Firsthand knowledge of tenant demand
• Honest, data-backed recommendations
• Proactive asset repositioning
• Full-cycle leasing execution

Building owners who partner with Johnston Pacific benefit from decades of experience and a team that treats every assignment as a long-term relationship, not a one-time transaction.

Conclusion

At 230 Calle Pintoresco, success wasn’t driven by luck or timing. It was the result of expert guidance, informed decision-making, and trust in proven advisors.

By listening to Johnston Pacific’s recommendations and investing strategically, the owner achieved:

• Faster lease-up
• Stronger tenant commitment
• Improved asset performance
• Long-term value protection

This case study demonstrates a simple truth:

When owners follow Johnston Pacific’s advice, they position their assets to outperform the market.

Think of spring cleaning as preventive maintenance with a sense of humor. It’s not just about tidying up; it’s about safety, efficiency, and making sure your building isn’t silently judging you every time you walk through the loading door.

So grab your clipboard (or tablet, we’re modern professionals here), and let’s talk about spring cleaning for industrial properties, without putting anyone to sleep.

Don’t forget to download Johnston Pacific’s handy Vendor guide to get all the help you need for this undertaking. (QR CODE)

Step 1: Declutter Like You Mean It (Yes, That Includes “Someday” Items)

Every industrial building has that corner. You know the one. It’s where obsolete equipment, mystery crates, and broken shelving go to retire. No one remembers who owns it, what it’s for, or why it’s still there, but everyone agrees it might be useful someday.

Spring cleaning is the perfect time to ask the tough questions:

• Has this machine been used in the last five years?
• Does anyone actually know how to operate it?
• Is “vintage” a valid excuse for keeping it?

Clearing out unused inventory and equipment does more than improve appearances, it frees up valuable square footage, improves workflow, and reduces safety hazards. Plus, it makes your building feel bigger without paying for an expansion. That’s what we call industrial magic.

Step 2: Floors, Walls, and Ceilings, Yes, All of Them

Industrial floors are tough, but they’re not invincible. Over time, oil stains, tire marks, and years of “we’ll clean it later” add up. Spring is the time to pressure wash, reseal, and repair cracks before they become trip hazards, or worse, tenant complaints.

Walls and ceilings deserve some love too. Dust buildup, cobwebs, and mysterious stains don’t exactly scream “well-managed property.” A deep clean improves lighting efficiency, air quality, and overall morale. Because let’s face it, people work better when they don’t feel like they’re inside a forgotten storage unit.

Step 3: Loading Docks, The Unsung Heroes of Your Property

Loading docks or doors take a beating year-round. Forklifts, trucks, pallets, and the occasional “oops” moment all leave their mark. Spring cleaning is the ideal time to inspect, roll up doors, dock levelers, bumpers, seals, and lighting.

A clean, well-maintained loading area isn’t just safer, it sends a message. To tenants, vendors, and drivers, it says: This operation is buttoned up. And in industrial real estate, that impression matters more than you think.

Bonus tip: repainting stripes and safety markings is a small investment with big visual impact. It’s like eyeliner for your warehouse, subtle, but effective.

Step 4: HVAC and Ventilation, Out of Sight, Not Out of Mind

If your HVAC system could talk, it would probably ask for a break. Filters clogged with dust, vents working overtime, and systems struggling to keep up are common issues in industrial buildings.

Spring is the perfect time for inspections, filter replacements, and maintenance checks. Clean systems improve air quality, reduce energy costs, and extend equipment life. They also prevent that awkward moment when a tenant asks why their warehouse smells like last summer.

Fresh air isn’t just for office buildings. Your industrial space deserves it too.

Step 5: Electrical Rooms and Panels, No More “Temporary” Storage

Somewhere along the way, electrical rooms tend to become unofficial storage closets. Boxes, tools, spare parts, stacked dangerously close to panels clearly labeled KEEP CLEAR.

Spring cleaning is your reminder that electrical rooms are not storage units. Clearing these areas improves safety, code compliance, and accessibility for maintenance. It also reduces fire risk, which is always a crowd favorite when talking about liability.

Think of it this way: if an electrician can’t access the panel without playing Tetris, it’s time to clean up.

Step 6: Exterior Areas, Because Curb Appeal Isn’t Just for Retail

Industrial properties don’t need fountains or flower arches, but that doesn’t mean exteriors should be ignored. Spring cleaning is a great time to:

• Power wash building facades
• Clear weeds and debris
• Touch up paint
• Repair fencing and gates
• Organize outdoor storage areas

A clean exterior improves first impressions for tenants, investors, and buyers. It also signals pride of ownership, which often translates to higher retention and stronger property value.

Even warehouses like to look sharp.

Step 7: Paperwork Counts as Cleaning Too

Spring cleaning isn’t just physical, it’s operational. Reviewing leases, maintenance records, warranties, and compliance documentation is part of keeping industrial property running smoothly.

Outdated records and expired inspections can create headaches later. A little organizational effort now can save a lot of scrambling down the road. Plus, nothing feels better than a clean file system, except maybe a clean loading dock.

The Bottom Line

Spring cleaning for industrial properties isn’t glamorous, but it’s incredibly effective. It improves safety, efficiency, tenant satisfaction, and long-term value. It also helps uncover issues early, before they become expensive problems with extra zeros attached.

And yes, it may require dumpsters, pressure washers, and a few honest conversations about whether that broken conveyor belt is ever coming back to life. But when the dust settles (literally), you’ll have a cleaner, safer, more functional property that’s ready for the busy seasons ahead.

Because spring cleaning isn’t about perfection, it’s about progress. And your industrial building will thank you for it… silently, of course.

DOWNLOAD OUR VENDOR GUIDE

For commercial industrial buildings in Orange County, that surprise rainstorm can be more than an inconvenience, it can be a wake-up call.

Because while people may forget umbrellas, industrial buildings don’t get the luxury of drying off and moving on. When a roof has been ignored, even a modest storm can expose years of deferred maintenance, turning a quiet asset into a very loud problem.

The Southern California Roof Illusion

Industrial property owners in Orange County face a unique challenge: the illusion of safety created by dry weather.

Months, sometimes years, can pass without meaningful rainfall. Roofs appear stable. No leaks, no complaints, no visible issues. That lull often leads owners to push roof inspections and maintenance further down the priority list.

But roofs don’t age based on rainfall alone. UV exposure, thermal expansion, aging membranes, foot traffic, clogged drains, and shifting structures all quietly take their toll. By the time rain finally arrives, the roof may already be compromised.

And when that happens, the building gets caught in the rain, with no umbrella in sight.

Water Finds the Weak Spot Every Time

Water is remarkably efficient. It doesn’t need a gaping hole to cause damage, just a seam that’s starting to separate, flashing that’s loosened, or a drain that’s clogged with debris.

Once moisture gets in, it spreads. Insulation absorbs it. Steel components begin to corrode. Ceilings stain. Electrical systems become vulnerable. In industrial environments, where inventory, machinery, and operations are critical, the consequences multiply quickly.

What might have been a simple repair during a routine inspection can become an emergency call during a storm, usually when contractors are busiest and costs are highest.

“It’s Never Leaked Before” Doesn’t Mean It Won’t

In Orange County industrial real estate, one of the most common refrains after a roof failure is: “It’s never leaked before.”

That statement is often true, and completely irrelevant.

Roofs don’t announce their decline. They perform… until they don’t. A roof that survived the last rainy season might not survive the next, especially if minor issues were left unaddressed.

Southern California storms tend to be short but intense. When drains back up or ponding water develops, older or neglected roofs can be overwhelmed quickly. At that point, owners aren’t preventing damage, they’re managing it.

Roof Maintenance Is an Investment Strategy

For industrial property owners, roof maintenance isn’t just about avoiding leaks, it’s about protecting the asset.

A properly maintained roof:

• Extends the building’s usable life
• Preserves tenant satisfaction
• Reduces unexpected capital expenditures
• Minimizes insurance claims
• Supports stronger resale and leasing value

In a competitive Orange County industrial market, where well-located properties command premium pricing, building condition matters. A documented maintenance history signals professionalism and stewardship. Deferred maintenance does the opposite.

From an investment standpoint, roof inspections and preventative repairs deliver one of the best returns in property ownership.

The Tenant Factor in Multi-Tenant Industrial Buildings

Roof issues rarely stay contained to one unit. In multi-tenant industrial properties, leaks can impact common areas, shared utilities, and neighboring spaces.

Tenants may understand that buildings age, but water intrusion sends a clear message. It suggests neglect, creates operational disruptions, and raises concerns about long-term reliability.

In tight industrial markets like South Orange County, tenant retention is critical. Keeping a building dry, functional, and predictable goes a long way toward keeping good tenants in place.

Emergency Repairs Are Always the Most Expensive Option

Roof failures have an uncanny ability to happen at the worst possible time, during active storms, weekends, or peak operational hours.

Emergency repairs typically mean:

• Higher labor costs
• Limited contractor availability
• Temporary fixes instead of long-term solutions
• Business interruptions

Preventative maintenance, by contrast, allows owners to plan, budget, and address issues on their own terms. It’s the difference between controlling the outcome and reacting to it.

Staying Ahead of the Storm in Orange County

In Southern California, rain may be infrequent, but it’s inevitable. Smart industrial property owners use the dry months to their advantage.

Regular roof inspections, proactive maintenance, and long-term planning ensure that when storms arrive, buildings are ready. No surprises. No scrambling. No water where it doesn’t belong.

Because in commercial real estate, the goal isn’t just owning property, it’s owning property that performs.

A Johnston Pacific Perspective

For more than 35 years, Johnston Pacific Commercial Real Estate has specialized exclusively in industrial properties throughout South Orange County. We’ve seen firsthand how overlooked details, like roof condition, can impact leasing, sales, and long-term asset performance. We’re not just brokers, we’re commercial building owners too!

Whether you’re evaluating a building for purchase, preparing a property for sale, or managing an existing industrial asset, understanding the condition of your roof is critical. It affects value, tenant confidence, and your bottom line.

If you’re unsure about where your property stands, or want guidance on positioning your industrial building for long-term success, our team is here to help. At Johnston Pacific, we don’t just track market trends; we help owners navigate the real-world details that protect and enhance their investments.

Because in Orange County industrial real estate, staying ahead of the storm is always better than getting caught in the rain.

Rather than a broad-based recovery across all property types, capital has flowed decisively toward industrial assets, underscoring the sector’s resilience and long-term value proposition. As we move into 2026, understanding industrial-specific trends, and partnering with a brokerage that knows the South Orange County market inside and out, is critical.

Orange County Industrial Investment Market: Stability Returns

Industrial investment activity increased for the second consecutive year as pricing expectations between buyers and sellers aligned more closely. Improved visibility around interest rates and debt structures encouraged investors who had paused during the 2022–2023 volatility to re-enter the market.

Key drivers behind the rebound include:

• Greater certainty around borrowing costs
• Motivated long-term ownership groups
• Strong demand from owner-users and industrial tenants
• Structural supply constraints throughout Orange County

As a result, Orange County continues to attract regional and national capital seeking durable, income-producing industrial real estate.

Industrial Real Estate Dominates Commercial Investment Activity

The industrial sector accounted for more than $2.1 billion in transaction volume, representing over one-third of all commercial real estate investment in Orange County in 2025, the highest industrial share recorded in more than a decade.

This sustained momentum reflects the strength of industrial fundamentals relative to other commercial asset classes.

Why Industrial Remains the Most Compelling Investment

• Severely limited land availability: Orange County is largely built out, significantly restricting new industrial development and supporting long-term pricing stability.
• Strategic location: Proximity to the Ports of Los Angeles and Long Beach makes Orange County, particularly South County, an essential hub for logistics, manufacturing, and distribution.
• Broad tenant demand: Aerospace, medical, technology, defense, light manufacturing, and service-oriented users continue to drive leasing activity.
• Infill advantage: Smaller-format industrial buildings under 50,000 square feet remain highly sought after by both investors and owner-users.

Even as vacancy has increased modestly due to recent project deliveries, well-located industrial properties continue to lease efficiently and maintain strong valuations, especially within South Orange County submarkets such as San Clemente, Lake Forest, Mission Viejo, Rancho Santa Margarita, and San Juan Capistrano.

Office vs. Industrial: Capital Chooses Certainty

While office investment activity showed limited improvement toward the end of 2025, industrial real estate continues to outperform due to its operational necessity and tenant stickiness. Investors favor industrial assets for their:

• Lower tenant improvement costs
• Shorter downtime between leases
• Greater adaptability to evolving business needs

These characteristics make industrial properties especially attractive in an environment where capital discipline and cash-flow certainty matter more than ever.

Why Local Industrial Expertise Matters More Than Ever

In today’s selective investment environment, deep local knowledge is not optional, it’s a competitive advantage. Micro-market dynamics, zoning regulations, building functionality, and tenant demand can dramatically impact value and performance.

This is where Johnston Pacific Commercial Real Estate stands apart.

Johnston Pacific: 35 Years of Industrial Real Estate Leadership in South Orange County

For more than 35 years, Johnston Pacific has specialized exclusively in industrial and commercial real estate throughout South Orange County. Our team has guided clients through multiple market cycles, interest-rate environments, and economic shifts, providing clear, strategic direction rooted in local experience.

Our long-standing relationships include:

• Industrial property owners
• Private and institutional investors
• Owner-users and operators
• Developers and lenders

This network allows us to identify opportunities early, price assets accurately, and execute transactions efficiently.

Whether you are acquiring, selling, or repositioning an industrial property, Johnston Pacific is the go-to brokerage for industrial property investment in South Orange County.

Industrial Outlook for 2026

As we look ahead, the fundamentals supporting industrial real estate in Orange County remain firmly intact.

Key Industrial Investment Trends for 2026

• Continued investor focus on infill industrial assets
• Strong demand for owner-user buildings
• Limited new supply reinforcing long-term value
• Increased activity among private capital and local buyers

For investors seeking stability, income, and long-term appreciation, industrial real estate remains the cornerstone of commercial investment strategies in Orange County.

Partner with Johnston Pacific

If you are considering an industrial real estate investment in South Orange County, now is the time to work with a brokerage that understands the nuances of this market.

Johnston Pacific Commercial Real Estate
35 years of experience
Industrial specialists
Deep South Orange County expertise

We help our clients navigate today’s market with confidence, and position their industrial portfolios for long-term success.

Whether you’re retiring, relocating capital, or restructuring your portfolio, here are the most effective steps you can take to reduce your tax liability and keep more of your money working for you.

1. Get a Clear Picture of Your Tax Exposure Early

One of the biggest mistakes sellers make is waiting until after a deal closes to think about taxes. At Johnston Pacific, we encourage clients to start tax planning as early as possible.

Here’s what typically applies to industrial real estate sales:

• Federal Capital Gains Tax (15–20%)
• Depreciation Recapture Tax (25%)
• California State Taxes (up to 13.3%)
• Net Investment Income Tax (NIIT) (3.8%)

The combined hit can exceed 35% of your gain. That’s why we coordinate early with your CPA and legal advisors to assess your cost basis, past depreciation, and estimated tax exposure, so you can make proactive, not reactive, decisions.

2. Defer Taxes with a 1031 Exchange

One of the most effective tools in a seller’s tax strategy is the 1031 Exchange, a mechanism that lets you defer capital gains and depreciation recapture by reinvesting in another qualifying property.

If you’re planning to stay in the real estate game, this is one of the smartest moves you can make.

Benefits include:

• Complete tax deferral
• Greater purchasing power for the next investment
• Portfolio growth and diversification

Johnston Pacific regularly helps clients’ structure seamless 1031 exchanges. We assist with timelines, recommend experienced qualified intermediaries, and help you source ideal replacement properties, often off-market or exclusive to our network.

Remember: You must identify a replacement within 45 days and close within 180 days. Precision and timing are everything.

3. Explore Delaware Statutory Trusts (DSTs)

If you’re ready to exit day-to-day management responsibilities but still want passive income and tax deferral, Delaware Statutory Trusts (DSTs) can be a compelling 1031 option.

DSTs allow you to invest in institutional-quality assets, such as Class A logistics centers or mission-critical facilities, without direct ownership or landlord duties. You still get:

• Monthly income distributions
• Tax deferral through 1031 eligibility
• Professional property management

At Johnston Pacific, we maintain relationships with reputable DST sponsors and can help guide you through suitability, timing, and investment structure.

4. Consider Opportunity Zones for Long-Term Tax Advantages

For certain sellers, investing capital gains into a Qualified Opportunity Fund (QOF) can unlock longer-term tax benefits:

• Tax deferral on your original gain until 2026
• Tax-free appreciation for new investments held 10+ years

While not every sale qualifies, this can be an advantageous strategy if you’re open to longer holding periods and want to reduce future taxes entirely. We can connect you with vetted fund sponsors and help assess the fit for your goals.

5. Think About Installment Sales

If you’re working with a qualified buyer and don’t need all the cash up front, a structured installment sale can spread your capital gains over multiple tax years, keeping you in a lower bracket and minimizing total taxes.

You’ll earn interest on the deferred portion and may avoid the additional 3.8% NIIT. Johnston Pacific can help evaluate buyer creditworthiness and structure secure, seller-friendly terms.

6. Offset Gains with Losses or Charitable Strategies

If you have investment losses elsewhere or are charitably inclined, there are creative ways to reduce your tax bill:

• Harvest investment losses to offset gains
• Donate part of the appreciated property to a charitable remainder trust (CRT) for an upfront deduction and ongoing income

Our advisory team can work alongside your tax planner to explore these alternatives and integrate them into your broader exit strategy.

The Johnston Pacific Advantage

At Johnston Pacific Commercial Real Estate, Inc., we’ve guided industrial property owners through hundreds of sales, always with a clear focus on maximizing both value and after-tax proceeds.

Our deep experience in South Orange County’s industrial market, combined with our strategic tax knowledge and collaborative approach with financial professionals, gives clients an edge that goes far beyond the closing table.

Thinking about selling your industrial property?
Let’s start with a conversation about value, timing, and strategy. Contact the Johnston Pacific team today, we’ll help you keep more of what you’ve earned and make your next move with confidence.

At Johnston Pacific, much of our time this year was spent helping clients navigate that middle ground: neither the overheated frenzy of 2021–22 nor the cautious pause of early 2024. Below is our wrap-up of how leasing and sales performed, what drove the changes, and how to position yourself heading into 2026, whether you’re exploring your first industrial purchase or adding to an established portfolio.

How the Market Performed in 2025

Leasing: Momentum Returned in Measured Steps

Leasing regained its pace through mid-2025, especially in larger format and modern buildings where tenants made long-delayed decisions. The Inland Empire and select infill pockets in Orange County and Greater LA absorbed fresh space as companies expanded or consolidated into higher-functioning facilities. Demand wasn’t uniform, but it was steady enough to absorb a meaningful share of the new supply delivered this cycle.

Sales: A Quiet First Half, Then Activity Picked Up

Higher financing costs kept many investors on the sidelines early in the year. As 2025 progressed, and pricing expectations adjusted, transaction volume began to rise again. We saw more private buyers, owner-users, and exchange-driven investors re-enter the market by Q3, especially for well-located coastal or infill properties where long-term scarcity still drives value.

Vacancy & Rents: A Stabilizing Plateau

New construction from the previous cycle pushed vacancy higher in late 2023 and 2024. By 2025, much of that pressure leveled off as supply slowed and tenants absorbed newly built space. Rents, which had previously grown at historic rates, settled into a more sustainable pattern, still healthy, but aligned with a mature market.

What Shaped 2025 Behind the Scenes

A few forces influenced what we saw this year:

• Interest rates held many investors back, moderating cap rates and extending time-on-market for listings.
• Deliveries from the construction pipeline filled the calendar, raising availability before tapering off toward year-end.
• Tenant preferences shifted toward functionality, with companies prioritizing loading efficiency, clear height, EV readiness, and reliable power.
• Submarkets became more differentiated, with the Inland Empire absorbing larger spaces and coastal submarkets trading on scarcity and specialized uses.

Looking Ahead: Johnston Pacific’s Outlook for 2026

While no cycle repeats exactly, 2026 appears poised for a more active, opportunity-driven market:

1. Leasing Should Continue Strengthening

As new supply slows and occupiers grow more confident, expect healthier absorption, particularly for buildings offering modern infrastructure or strategic infill access.

2. Sales Activity May Improve if Financing Eases

If rate pressure softens, sidelined buyers will likely return quickly. Even without major rate changes, we expect more realistic bid-ask spreads to support stronger deal flow.

3. Modernization Will Create Winners

Buildings with functional advantages, clear height, yard space, sustainability features, power capacity, will outperform. Older stock that doesn’t upgrade will lag.

4. Investors Will Prioritize Flexibility and Risk Management

Conservative underwriting, capex planning, and diversified tenant mixes will be key themes as owners aim for resilience rather than purely aggressive growth.

Guidance for Investors: Getting Started or Scaling Up

If You’re Exploring Your First Industrial Investment

Start with a clear objective.
Is your focus income stability, long-term appreciation, or a value-add play? Your path looks different depending on the answer.

Learn your submarket deeply.
Southern California changes block by block. Understanding truck routes, use restrictions, and tenant profiles is worth its weight in gold.

Consider teaming with an experienced operator.
Leasing, management, and due diligence all carry nuance, especially in coastal markets where regulations can be intricate.

Favor functionality over charm.
Industrial tenants care about efficiency. Dock-high loading, modern power, and parking ratios will matter more than cosmetic updates.

If You’re Expanding an Established Portfolio

Target differentiation, not just expansion.
Infill last-mile, cold storage, and flexible small-bay product will remain the most resilient performers.

Mind your debt stack.
2026 could bring refinances, and planning ahead provides more negotiating power.

Evaluate older buildings as repositioning plays.
Obsolete space can become a profitable project with the right capex plan, solar, upgraded loading, mezzanines, or EV-ready infrastructure.

Leverage exchanges and creative structures.
1031s, sale-leasebacks, or strategic partnerships can help you scale without overextending capital.

A Quick Due Diligence Snapshot

Whenever you’re eyeing a property, make sure you check:

• zoning and use restrictions
• loading configuration and truck maneuverability
• power availability
• roof, slab, and parking condition
• tenant rollover timing and escalation schedules
• nearby supply under construction
• environmental history (Phase I/II if needed)

Final Thoughts from Johnston Pacific

2025 reminded Southern California investors that industrial real estate isn’t a sprint, it’s a cycle-driven business where patience, timing, and asset quality outweigh hype. As we enter 2026, we see a market full of selective but very real opportunities for those who move strategically.

If you’re a business owner currently leasing space, 2025 could be the year to explore ownership. Here’s why our clients are making the switch:

1. Equity Over Expense

Every month you lease space is a month spent building someone else’s wealth. Ownership turns those same payments into equity that builds your future. Several Johnston Pacific clients who purchased in the last 24 months have already seen significant appreciation, some with equity gains that outpace their original down payments.

2. Proven Financing Strategies That Work

SBA 504 and 7(a) loans, which offer low down payments, long-term fixed rates, and financing options that include buildout costs. Whether you’re a startup or a second-generation company, Johnston Pacific has relationships with lenders that understand how to structure deals for owner-users in South OC.

3. Tax Advantages That Pay Dividends

Ownership brings powerful tax benefits. Talk to your CPA to ensure you’re taking full advantage of mortgage interest deductions, property depreciation, and potential capital gains deferrals. In many cases, these benefits make ownership a better financial decision, even when monthly costs are similar to leasing.

4. Control Your Space. Control Your Future.

As commercial real estate advisors, we’ve seen too many businesses disrupted by unpredictable lease renewals or restrictions on how they can use their space. When you own your building, you gain total control over how you use and improve your property. Whether you need upgraded power, high ceilings, additional parking, or a customized office layout, you call the shots.

5. Scarcity = Stability

South Orange County is a land-constrained market with very limited industrial inventory under 20,000 SF. Ownership not only locks in your location, but it also gives you an asset in one of the most sought-after markets in the region. Buildings we sold just a few years ago are now commanding top dollar or producing strong lease income for their owners.

Real Results from Johnston Pacific Clients

In Q2 alone, Johnston Pacific represented several business owners who made the leap from leasing to owning and they’re already seeing the benefits. One client opened escrow on a freestanding warehouse in less than 10 days!

Is Now the Time for You to Buy?

Every business is different, and that’s why we take a consultative, no-pressure approach to evaluating whether buying makes sense. At Johnston Pacific, we’ve helped business owners in manufacturing, distribution, creative services, biotech, and more find the right properties, secure financing, and build equity through ownership.

Let’s talk about what’s possible.
Call Johnston Pacific at 949-366-2020 for a confidential consultation and let’s see if buying your next space could be your best business decision in 2025.

The good news? With the right planning, you can significantly reduce your tax burden, reinvest more of your capital, and ensure your next chapter starts from a position of strength. Whether you’re retiring, transitioning into a new venture, or diversifying your investments, here are proven strategies to minimize taxes and maximize your net proceeds from a business sale.

1. Understand Your Tax Exposure Before You Sell

The first step in protecting your proceeds is knowing exactly what taxes you might face. The structure of your business (corporation, LLC, partnership, sole proprietorship) and how the deal is structured (asset sale vs. stock sale) will have a major impact on your tax bill.

Common taxes include:

• Federal Capital Gains Tax (15–20% depending on income)

• Depreciation Recapture Tax (25% on prior depreciation)

• State Taxes (in California, as high as 13.3%)

• Net Investment Income Tax (NIIT) (3.8% for certain income levels)

• Ordinary Income Tax (if parts of the sale are treated as income rather than capital gain)

At Johnston Pacific, we recommend working closely with your CPA well before your business hits the market. A thorough review of your tax exposure, business assets, and potential deal structures can reveal opportunities to lower your tax bill before a buyer even comes into the picture.

2. Structure the Deal Strategically

When selling a business, how the sale is structured can be just as important as the price you receive.

• Stock Sale: Often preferred by sellers, as it typically results in capital gains treatment and avoids double taxation for corporations.

• Asset Sale: Common for buyers, but can trigger ordinary income taxes on certain assets (like inventory or receivables) and depreciation recapture.

A well-negotiated deal can align buyer and seller interests while minimizing your overall tax hit. Johnston Pacific works with your legal and tax team to help position the transaction in a way that’s both marketable and tax-efficient.

3. Use an Installment Sale to Spread Out Gains

If you don’t need the full proceeds right away, an installment sale can spread capital gains over several years. This approach:

• Keeps you in a lower tax bracket annually

• Reduces exposure to the NIIT

• Allows you to earn interest on the deferred balance

We help our clients evaluate buyer creditworthiness and structure terms that protect your interests while creating meaningful tax benefits.

4. Leverage a 1031 Exchange for Business-Related Real Estate

If your business owns real estate, you may be able to defer taxes on that portion of the sale by using a 1031 Exchange to reinvest into another qualifying property. This strategy can allow you to unlock equity from your business sale while continuing to grow wealth in real estate—without taking the immediate tax hit.

Our team has deep expertise in executing 1031 Exchanges and can help you align your business and property sale timelines for maximum efficiency.

5. Consider Opportunity Zones for Long-Term Gains

For sellers looking to reinvest in new ventures or real estate, Qualified Opportunity Funds (QOFs) can be a way to defer and potentially eliminate taxes on part of your gains.

By rolling eligible gains into a QOF:

• You defer paying taxes until 2026

• Any appreciation in the new investment can be tax-free if held 10+ years

While not the right fit for everyone, Opportunity Zones can be a smart tool for those looking at long-term reinvestment strategies.

6. Explore Charitable and Estate Planning Strategies

If part of your motivation in selling is to fund charitable causes or pass wealth to the next generation, integrating tax-advantaged giving and estate planning can make a big difference.

Options include:

• Charitable Remainder Trusts (CRTs) for upfront tax deductions and lifetime income

• Gifting business interests prior to sale to reduce your taxable estate

• Donor-Advised Funds (DAFs) for flexible charitable giving

By aligning your sale strategy with your personal financial and legacy goals, you can keep more of your wealth while making a lasting impact.

The Johnston Pacific Advantage

While Johnston Pacific is best known for our expertise in commercial real estate, we also serve as strategic advisors for business owners whose transactions involve real estate components or complex asset sales. Our network of trusted CPAs, attorneys, and financial planners—combined with our deep transactional experience—ensures that your business sale is handled with the same precision and tax-conscious strategy we bring to every real estate deal.

Thinking about selling your business?
Before you take the first step, talk to Johnston Pacific about a confidential review of your options. We’ll help you identify the best structure, minimize taxes, and set you up for the strongest financial outcome in your next chapter.

While reducing tax liability is valuable on its own, these provisions go much further. They release trapped capital, improve balance sheets, and empower investors to make bold moves, whether acquiring new properties, upgrading existing assets, or restructuring portfolios for better performance.

Immediate Expensing = Immediate Cash Flow

Let’s take a deeper look at how this works in practice.

When real estate owners can write off 100% of qualified improvements in the first year, they reduce their taxable income substantially. This results in significantly lower tax bills, meaning more capital is retained in the business instead of being sent to the IRS.

For example, if a developer invests $1 million in qualifying upgrades and is in a 35% tax bracket, the tax savings could reach $350,000. That’s $350,000 in real, spendable cash, available in year one, that can be used to finance new acquisitions, cover operating expenses, or strengthen the business’s financial position.

In an industry where liquidity and timing are everything, that kind of flexibility is a game changer.

Why Cost Segregation Matters More Than Ever

One of the most effective ways to fully capitalize on these enhanced tax benefits is through cost segregation studies.

Cost segregation is a method of accelerating depreciation by identifying components of a building that qualify for shorter recovery periods (e.g., 5, 7, or 15 years instead of 39 years). This means more of a property’s value can be written off faster, especially when combined with bonus depreciation.

Cost segregation isn’t new, but the recent tax changes have made it more valuable than ever. For any investor who has purchased, built, or renovated commercial property since the BBBA’s enactment, a cost segregation study can uncover hundreds of thousands, even millions, in potential deductions.

Real Estate Investing with an Edge

Cash flow is the engine of any successful real estate venture. Whether you’re syndicating deals, managing a REIT, or simply building your portfolio, the ability to generate capital internally gives you a distinct competitive advantage. Johnston Pacific Commercial Real Estate, Inc. can assist you in expanding your portfolio or get you started on commercial real estate investing.

Here’s what enhanced cash flow enables:

• Faster project scaling
  Investors can roll gains from one property into the next more quickly, creating a compounding effect on growth.
• Reduced reliance on external financing
  Strong cash reserves reduce the need for costly debt and allow investors to negotiate better terms.
• Strategic reinvestment
  Instead of waiting years for depreciation benefits to accumulate, investors can redirect savings immediately into new value-creating opportunities.
• Improved investor relations
  For syndicators or fund managers, showing early returns through strong cash flow builds confidence and helps attract future capital.

As Jeff Pori from Kingsbarn Realty Capital put it:

“Our clients are now positioned to reinvest sooner, improve their ROI faster, and keep their projects moving forward with less financial friction.”

A New Era of Strategic Tax Planning

What we’re seeing is not just a tax benefit, it’s a strategic opportunity. Real estate professionals who proactively align their tax planning with their growth strategies will find themselves better positioned to navigate the cycles of the market.

This is particularly true in high-cost markets, where renovation budgets often exceed millions and traditional depreciation schedules offer little short-term relief. By leveraging cost segregation and immediate expensing, investors can unlock dramatic cash flow improvements even in markets with compressed cap rates and rising construction costs.

Final Thoughts

The combination of restored 100% bonus depreciation, expanded Section 179 expensing, and cost segregation is a powerful trio for real estate investors looking to gain every possible edge.

What used to be long-term tax planning now delivers short-term results, and those results can fund the next deal, strengthen your position in a competitive market, and turn real estate investments into high-performing engines of growth.

If you haven’t reevaluated your depreciation strategy, now is the time. Because in today’s market, smart tax planning isn’t just about savings, it’s about acceleration.