The industrial market is hot throughout Southern California. From San Diego and Orange County to Los Angeles to the Inland Empire, occupancy rates and rental rates are hitting historic highs and the development pipeline continues to grow. According to a second quarter report from JLL, Los Angeles rental rates increased 7%; Orange County rents reached $9 per square foot, a market record; while rents are reaching $7 per square foot in the Inland Empire West and $6 per square foot in the Inland Empire East. As institutional and private capital is ever increasing its exposure to industrial product, it is important to note the nuanced differences driving the activity in each of these markets. In Los Angeles, a severe but basic supply-demand imbalance is the broad stroke cause for activity, according to Zac Sakowski, EVP at JLL. "The Los Angeles industrial leasing market is being drievn by strong market fundamentals, specifically tenant demand, which appears to be unstoppable, and a lack of supply," he tells GlobeSt.com. The dynamic in Orange County is similar, and as a result, the bulk of leasing activity in the market is coming from renewals, rather than new leases. "Renewals dominated the Orange County industrial leasing activity by a large margin over new lease deals," Zach Niles, managing director at JLL, tells GlobeSt.com. "Simply put, it's a supply problem. Demand remains as strong as ever. However, historically low vacancy is limiting the opportunity for new deals. As such, renewal activity is dominating the leasing landscape because for many companies, it's the only option." The renewal activity and tight supply has pushed many industrial users to look for space elsewhere, and the Inland Empire has benefitted from that trend. "The Inland Empire industrial leasing market is being driven by companies migrating from the Los Angeles area because of lack of supply, rising rents and consolidation," Mike McCrary, managing director at JLL, tells GlobeSt.com. "Additionally, firms are looking to areas like the Inland Empire where they can lease a more efficient modern building with abundant amenities. The growth of ecommerce and a strong labor pool is having a big impact on the growth of the Inland Empire industrial market." As a result, the Inland Empire has a dynamic user base, which has ultimately helped to stabilize and fuel growth in the market. "Fortunately, the Inland Empire industrial market isn't dependent on one industry," adds McCrary. "We continue to see demand from food and beverage, automotive and ecommerce/retail companies, just to name a few." In the coastal markets, it is no surprise that the primary user and driver of leasing activity is ecommerce, fulfillment and 3PL companies. "They are making bets that the proximity to population hubs and service of last mile delivery needs will continue to fuel our economy," says Sakowski. "Los Angeles has a growing population with strong buying power, and that leads to a massive GDP within the region, all of which are drivers for industrial real estate." The ecommerce trend has become the new normal in urban infill markets, and we can't expect the trend to be longstanding. "Expect much of the same for the foreseeable future as e-commerce's demand for industrial space is fueled not only by growth in consumer spending, like other industries, but also the fact that retailers' physical shift from brick-and-mortar retail to warehouse is far from complete," says Niles.