Thin construction and steady absorption set up landlords near Ontario International Airport and south Riverside County for continued pricing power.
The Inland Empire’s retail market is delivering a study in contrasts: the metro entered July with the highest retail vacancy rate among major U.S. markets, yet tenant demand over the past three quarters ranked among the strongest in the country, according to Marcus & Millichap’s Riverside-San Bernardino Metro Area Retail Market Report for the third quarter of 2026.
“Retail demand in the Inland Empire has gained modest traction and limited new supply should support healthy retail occupancy,” said Jonathan Giannola, senior managing director and market leader at Marcus & Millichap, according to the report. Retailers absorbed a net 980,000 square feet across Riverside and San Bernardino counties over the three quarters ended in June, the third-highest total among major U.S. metros, trailing only Dallas-Fort Worth and Phoenix. Roughly 60 percent of that absorbed space involved single-tenant properties.
Despite that demand, overall vacancy stood at 7.1 percent as of early July, the highest mark among major U.S. markets tracked in the report. Marcus & Millichap frames that figure as more a reflection of the metro’s scale and supply history than a sign of distress: the rate sits 70 basis points below the market’s long-term average and roughly in line with its prior 10-year mean. Single-tenant vacancy told a similar story, ending June at 7.5 percent, the second-highest such rate nationally, with availability concentrated largely in drug and department stores while quick-service, restaurant and supermarket vacancy ran well below the metro average.
The multi-tenant segment showed sharper improvement. Shopping center vacancy fell 80 basis points over the 12 months ended in June to 5.6 percent, the second-largest such decline among major U.S. metros and a rate 250 basis points below the sector’s long-term mean, according to the report. Marcus & Millichap attributes the tightening to scant multi-tenant construction, which has limited expansion options for retailers and is expected to support retention and leasing at existing centers.
New supply is thinning further. As of mid-July, just 330,000 square feet of retail space was under construction, equal to 0.2 percent of existing inventory, with the report projecting 590,000 square feet to be added by year-end, a 0.4 percent increase to the metro’s inventory. That marks a sharp pullback from the prior 12 months, when more than 1.4 million square feet was delivered across Southern California, with roughly 55 percent of that volume — about 770,000 square feet — landing in the Inland Empire and lifting the metro’s inventory by 0.5 percent. Construction activity has since been particularly scarce in San Bernardino County, aiding property operations in major cities including Ontario, according to the report.
Marcus & Millichap forecasts vacancy easing to 7.0 percent by year-end, a 30-basis-point decline from a year earlier, while average asking rent is projected to rise 2 percent year-over-year to $20.60 per square foot. That rate has hovered between $20 and $21 per square foot for nearly four straight years and remains $8 to $15 per square foot below other major Southern California markets — a discount the report says should continue to draw retailers plotting regional expansion, even as the Mojave River Valley bucked the broader trend with double-digit rent growth over the past year.
Employment is adding a modest tailwind. The metro added 6,900 education and health services jobs in the first half of 2026, offsetting modest losses across most other major segments, according to the report. The Inland Empire is the only Southern California market still recording population growth, a dynamic Marcus & Millichap expects to keep driving demand for medical care, schooling and last-mile services tied to consumer spending.
On the investment side, overall deal flow rose 10 percent year-over-year in the 12 months ended in June, led by a pickup in single-tenant trading, with private investors — willing to accept a more management-intensive ownership approach — closing 70 percent of transactions below $5 million even as borrowing costs remain elevated, according to the report. “Investors continue to find value-add opportunities even with a higher cost of debt with private capital being the most active in the market,” Giannola said. Properties net-leased to quick-service and restaurant chains traded most frequently over the past year, with deal flow spread across both counties; roughly half of fast-food trades closed below $1,000 per square foot, while restaurant properties commanded an average of $475 per square foot as segment vacancy fell 160 basis points to the mid-3 percent range. Smaller neighborhood and community centers accounted for two-thirds of recent multi-tenant deal flow, with some private buyers acquiring assets for less than $5 million in the Mojave River Valley and San Bernardino proper.
Investors chasing the tightest submarkets have gravitated toward south Riverside County and areas near Ontario International Airport, both of which ended June with vacancy below 4 percent and minimal construction pipelines, the report found. Temecula-Murrieta’s apartment inventory grew 6 percent over the past year, adding residential density that Marcus & Millichap expects to further support consumer demand in that corridor. Taken together, the report’s findings suggest a market where headline vacancy overstates near-term risk, and where thin construction and steady, if uneven, job growth are setting up landlords in the tightest pockets of the Inland Empire for continued pricing power heading into 2027.
