U.S. industrial fundamentals began to stabilize in late 2025, with demand improving, vacancy holding near an inflection point, and supply pressures easing—setting a more balanced backdrop heading into 2026.
Key Takeaways
Demand accelerated in 2025, with net absorption reaching 176.8 msf, up 16.3% YoY, despite tariff uncertainty and labor cooling.
Vacancy stabilized near an inflection point, holding at 7.1% for a third consecutive quarter as demand caught up with moderating supply.
Development activity rebounded, rising for a second straight quarter, with one-third of U.S. markets reporting increased construction in Q4.
Industrial Demand Reaccelerated in H2 2025, Led by Inland Logistics Markets
Industrial tenant demand strengthened in the second half of 2025 despite ongoing trade uncertainty. Net absorption exceeded 50 million square feet for two consecutive quarters for the first time since 2023, with Q4 absorption up 29% year over year and a majority of U.S. markets posting annual gains. Demand was driven primarily by large occupiers seeking modern, power-intensive logistics facilities, while inland markets—including Dallas–Fort Worth, Indianapolis, Phoenix, and Kansas City—outpaced traditional port-proximate hubs as maritime trade volumes moderated.
Industrial Vacancy Holds as Supply and Rents Cool
U.S. industrial vacancy held at 7.1% in 2H 2025, rising just 45 bps YoY, the smallest annual increase in three years, as speculative supply slowed and demand firmed; 53% of U.S. markets recorded flat or declining vacancy QOQ in Q4. Smaller-format assets remained the tightest segment (4.8% vacancy), while large-box facilities (>300K sf) tightened to 9.8% from a 10.6% mid-year peak, supported by improving demand from 3PL, manufacturing, food and beverage, and e-commerce users. Asking rent growth slowed to 1.5% YoY, with declines concentrated in the Northeast (-3.8% YoY) and West (-4.5% YoY) following earlier-cycle rent surges (~100% and ~60% growth from 2019 to peak, respectively); despite near-term softness, one-third of U.S. markets still recorded rent growth exceeding 50% between 2020 and 2025, keeping occupancy costs elevated for tenants rolling longer-dated leases.
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Outlook
U.S. industrial demand is expected to remain steady in the near term and strengthen in 2H 2026, with new supply staying modest and vacancy likely near peak levels before gradually tightening. A below-average development pipeline and a higher share of build-to-suit projects should limit speculative risk, while trade policy, housing activity, and consumer spending remain the key swing factors for upside or downside demand.
