Tariffs are hitting Inland Empire construction where it's already weakest
Citrus Belt Review: The figure that frames the moment comes from the Allen Matkins/UCLA Anderson Forecast survey released last October: 36% of California CRE developers reported delaying or canceling projects in response to higher construction costs and global trade tensions. Cushman & Wakefield, in an April 2026 analysis, estimated that the current tariff regime adds roughly 6% to materials costs against a pre-tariff 2024 baseline and about 3% to total project cost — with steel, aluminum, and copper items carrying a 50% tariff as of April. Nationally, construction input prices climbed at what one Construction Dive analysis called a staggering 12.6% annualized rate over the first two months of 2026, led by wire, cable, copper, and steel.
In most markets, that's a margin problem: costs outrun what contractors can charge, and the squeeze shows up in thinner returns. The Inland Empire's problem is different, because the demand side is already soft. CBRE's Q1 2026 figures put Inland Empire Core industrial vacancy at 7.8%, with negative net absorption of 4.7 million square feet for the quarter — driven by move-outs in buildings of 500,000 square feet and up. Colliers, tracking a slightly broader footprint, counted roughly 53 million square feet of empty industrial space against a 660-million-square-foot inventory. Vacancy that sat near 0.6% in early 2022 has normalized into the high single digits, and the construction pipeline has thinned to its lowest level in over a decade — construction starts fell from a 2022 peak of about 34 million square feet to roughly 13 million in 2024, with 2026 deliveries potentially landing below 5 million.
Stack a cost shock on top of that and the arithmetic gets unforgiving. A developer weighing a speculative building in a market with 53 million square feet already vacant has little pricing cushion to absorb a 3% jump in project cost, let alone a 6% jump in materials. The tariff doesn't just trim the return; it can flip the underwriting from go to no-go. That's the inversion: nationally, expensive materials are a problem for builders who still have tenants waiting. In the Inland Empire, expensive materials are a problem for builders deciding whether there are enough tenants to build for at all.
There are counter-signals worth respecting. CBRE recorded 854,000 square feet of new groundbreakings in Q1 2026 after a quarter with zero starts, and new leasing surged about 40% quarter over quarter to 13.6 million square feet — evidence that well-capitalized sponsors are still moving on Class A product, and that a thinner pipeline today means less competitive supply when these projects deliver in 2027. The region remains the nation's premier distribution hub. But the developers leaning in are the ones who can underwrite through the cost shock. For everyone working a tighter pro forma, tariffs are the variable deciding whether the Inland Empire's recovery quarter turns into a recovery year.