East Bay Industrial Market Mid-Year 2026 Review

Vacancy is rising in large-format distribution, but small bay industrial tells a different story. A submarket-by-submarket look at where the East Bay industrial market stands heading into summer 2026.

The East Bay industrial market entered 2026 with a narrative that requires more nuance than a single vacancy number can provide. Headline figures show vacancy climbing across the broader Oakland-East Bay market, driven almost entirely by large-format warehouse and distribution space. But for the property owners, investors, and tenants operating in Contra Costa County's small bay industrial segment, conditions remain materially tighter.

This mid-year report examines both stories—the broader market shift and the submarket-level fundamentals that matter most for industrial properties between 5,000 and 50,000 square feet.

Market Overview: Two Markets in One

The broader East Bay industrial market—spanning Alameda and Contra Costa Counties and encompassing roughly 279 million square feet of inventory—closed Q1 2026 with an overall vacancy rate of 8.0%, up 70 basis points from Q4 2025 and 80 basis points year-over-year. This represents a significant shift from the sub-5% vacancy rates the market enjoyed as recently as late 2022.

However, this headline number is heavily influenced by large-format warehouse and distribution space, particularly along the I-880 corridor in Alameda County. Several large blocks of space have come back to the market as tenants in the 100,000+ SF range have right-sized their footprints following the post-pandemic logistics buildout. Negative net absorption persisted through much of 2025, with Q4 alone recording approximately 138,000 square feet of negative absorption.

The small bay industrial segment—properties under 50,000 square feet with multiple tenants—operates in a fundamentally different supply-demand environment. Nearly all new industrial construction in the Bay Area targets large-format distribution users. No one is building new 20,000 SF multi-tenant industrial parks. The existing supply of small bay space is effectively fixed, and demand from local service businesses, contractors, and small manufacturers remains consistent.

Contra Costa County Submarket Performance

Contra Costa County continues to outperform the broader East Bay in leasing velocity and occupancy for smaller industrial product. Here's how the key submarkets are tracking at mid-year:

Concord

Concord remains the county's largest and most active industrial submarket. Vacancy for small bay product has held in the low-to-mid 3% range, and asking rents continue to push above $1.50/SF NNN. Demand from construction trades, auto services, and small distribution tenants has been consistent. Properties with drive-in door access and small yard areas continue to lease quickly.

Walnut Creek

Walnut Creek has the tightest industrial market in Contra Costa County—and arguably the tightest in the entire East Bay—but the inventory is small enough that a single vacancy can move the needle. Rents are the highest in the county, reflecting the premium location and limited supply. Few transactions occur here simply because very little turns over.

Martinez and East County

Martinez continues to attract tenants seeking larger yard areas and more affordable rents. The submarket remains 15–20% below Concord pricing, making it a natural landing spot for cost-conscious operators. Antioch and Pittsburg have seen the fastest rent growth in percentage terms, though from a lower base. As Concord pricing pushes upward, tenant migration to East County continues.

Investment Sales Activity

Investment sales velocity in early 2026 has been measured but active. Transaction volume across the East Bay remains below the peaks of 2021–2022, but deal flow for well-located small bay and multi-tenant industrial assets has held up better than many expected given the interest rate environment.

Cap rates for stabilized multi-tenant industrial properties in Contra Costa County currently range from 5.75% to 6.50%, depending on location, tenant quality, and lease term. This range has been relatively stable since mid-2025 as the market has absorbed the rate environment. Value-add opportunities with below-market rents continue to trade at tighter cap rates, typically in the 5.25% to 5.75% range, as buyers underwrite to pro forma income.

Average sale prices for small bay industrial in the Contra Costa County submarkets range from approximately $225 to $300 per square foot, with Concord and Walnut Creek commanding the upper end and East County properties at the lower end.

Owner-user sales remain active with limited inventory on the market. We're also seeing increased investor interest in multi-tenant properties as buyers gain confidence that rent growth can offset the higher cost of capital.

Tenant Demand Drivers

The tenant profile driving demand in Contra Costa County's small bay market has remained consistent, with a few emerging trends worth noting:

• Construction and trades: Contractors, plumbers, electricians, HVAC, and landscaping companies continue to be the dominant demand driver. These tenants need shop space with yard access and are relatively insensitive to rent increases given the essential nature of their work.
• Auto services: Auto repair, body shops, and specialty vehicle services remain a consistent source of demand, particularly for spaces with adequate power and roll-up doors.
• Last-mile distribution: E-commerce fulfillment and local delivery operations seeking spaces between 5,000 and 15,000 SF close to residential population centers.
• Food and beverage: Commissary kitchens, small-batch food production, and beverage distribution continue expanding, though these tenants often require specific infrastructure (grease traps, three-compartment sinks, cold storage).
• EV and clean energy: Electric vehicle service shops and charging infrastructure companies are an emerging demand driver, though still a small share of total leasing activity.

Interest Rates and Financing

The Federal Reserve's monetary policy remains the primary variable affecting industrial investment sales volume. As of mid-2026, the 10-year Treasury yield has fluctuated in the 4.0–4.5% range, and commercial mortgage rates for stabilized industrial properties are running approximately 6.0–6.75% depending on leverage, borrower strength, and property quality.

For owner-users, SBA 504 loans continue to offer the most competitive terms, with 25-year fully amortizing structures and rates that remain attractive relative to conventional financing. SBA loan activity for industrial acquisitions in the East Bay has been steady through the first half of the year.

Looking Ahead: Second Half 2026

For Property Owners

Owners of small bay multi-tenant industrial in Contra Costa County remain in a favorable position. Tight vacancy gives landlords leverage on renewals, and the gap between in-place rents and current market rates continues to present opportunities to grow income as leases expire. The key risk is tenant credit—monitor smaller tenants for signs of financial stress, particularly those exposed to discretionary consumer spending.

For Investors

Multi-tenant industrial in the East Bay continues to offer compelling risk-adjusted returns relative to other commercial property types. The supply constraint is structural, not cyclical—no new small bay is getting built, full stop. Investors should focus on assets with below-market rents, staggered lease expirations, and functional building configurations that appeal to a broad tenant base. Properties with deferred maintenance or functional issues can be acquired at discounts that more than justify the capital investment required.

For Tenants

Space options remain limited for tenants seeking 2,000 to 10,000 SF in Concord, Pleasant Hill, and Walnut Creek. Tenants with flexibility on location should consider Martinez and East County, where rents are meaningfully lower and availability is modestly better. Starting the search early and being prepared to move on a space quickly remains the best strategy in this market.

Alex Peck

Principal at Lee & Associates East Bay, specializing in multi-tenant industrial properties throughout Contra Costa and Solano Counties.

apeck@lee-associates.com · (925) 239-1414