The Inland Empire's warehouses were built for Asian imports — freight strategy is moving toward Mexico
The Inland Empire's warehouse economy was underwritten by one thing: containers coming off ships at Los Angeles and Long Beach, then moving inland for storage and distribution. That model is now facing a structural question it hasn't had to answer before.
CBRE puts IE Core vacancy at 7.8% in the first quarter, up 70 basis points, on negative net absorption of 4.7 million square feet — driven by four blocks over one million square feet emptying out. Colliers tracks the region at 8.1% with the third-lowest absorption on record; Cushman & Wakefield has overall IE vacancy at 8.5%, more than double its 10-year average of 4.0%. Brokers attribute the Q1 move-outs to tenants consolidating, relocating, or leaving — cyclical causes, not a single shock.
But underneath the cycle sits a shift in where American importers want their goods to enter the country. The Port of Los Angeles is forecasting a 7% decline in container volume in fiscal 2026-2027, to 9.3 million TEUs, and port management points directly to importers seeking routes through Mexico and Canada to avoid China tariffs. China's share of containerized imports through Los Angeles has fallen to about 40% in 2026, down from 53.4% in 2025 and 61% in 2020. The gateway the IE was built to serve is handling a changing mix of freight.
The nearshoring build-out is real, but it is not happening here. CBRE's national outlook argues Mexico's tight industrial market is pushing companies to open U.S. distribution centers near the border or along the Interstate 35 corridor — naming San Antonio, Dallas-Fort Worth, and Kansas City. Cross-border trucking gateways like Laredo and Otay Mesa capture that freight. A Pacific import hub 60 miles inland from the ports is on the other side of that trade.
The policy backdrop sharpened this week. On July 1, the U.S. declined to renew USMCA in its current form, triggering annual reviews until the issues are resolved or the pact expires in 2036, with U.S.-Mexico bilateral talks set to resume the week of July 20. U.S.-Mexico two-way trade hit a record $872.83 billion in 2025, and the review is expected to focus on rules of origin and China-content thresholds — the exact terms that determine how much production actually relocates to North America and how fast.
For an IE operator, the near-term read is not alarm. Port volumes remain enormous, the construction pipeline has nearly shut off — roughly 102,000 square feet delivered in Q1 2026 against nearly 2 million a year earlier — and that supply discipline should cap further vacancy increases. Some brokers expect absorption to firm as large signed leases take occupancy. The longer read is the one worth watching: a distribution economy whose original demand driver was Asian ocean freight now sits at the edge of a supply chain being redrawn toward Mexican land freight. The magnitude of that shift isn't yet measurable in IE square footage. The direction is not in question.