The U.S. industrial market showed renewed strength in Q3 2025 as demand broadened across regions and supply growth moderated. Net absorption rose 30% quarter-over-quarter to 45.1 million square feet—the highest level in over a year—underscoring steady occupier confidence despite tariff pressures and slower consumer spending. Leasing activity remained concentrated in newer, high-efficiency facilities as tenants optimized distribution networks, while balanced vacancy and moderating rent growth reflected a market settling into a more sustainable equilibrium after years of rapid expansion.
Key Takeaways
Industrial demand strengthened for the second consecutive quarter, with net absorption reaching 45.1 million square feet—up 30% QOQ and 33% YOY—signaling broad-based recovery across major U.S. markets.
Vacancy held steady at 7.1%, supported by healthy leasing and sharply lower construction deliveries, which fell 32.5% year-over-year to an eight-year low of 63.6 million square feet.
Rent growth moderated but remained positive, averaging $10.10 psf (+1.7% YOY), with more than half of markets still posting gains amid strong demand for modern, high-quality space.
Demand Expands Across Markets as Flight-to-Quality Persists
Industrial fundamentals strengthened in Q3 2025, with net absorption rising 30% quarter-over-quarter to 45.1 million square feet—the highest level in more than a year. Demand was broad-based, with positive absorption in two-thirds of U.S. markets and standout growth in Dallas–Fort Worth, Indianapolis, Houston, Central New Jersey, Phoenix, and Kansas City, each exceeding 3 million square feet. Several metros that saw losses earlier in the year, including Atlanta, Central New Jersey, and San Diego, returned to positive territory.
The flight-to-quality trend remains clear, as large occupiers consolidate into newer, high-efficiency regional hubs built since 2020, which have collectively recorded 196 million square feet of net growth year-to-date. Rent growth continues to moderate—up 1.7% year over year—with nearly 60% of U.S. markets posting positive gains and nine achieving double-digit increases. Rent declines were largely concentrated in the West and Northeast regions, which were down 3.0% and 3.7% YOY, respectively. Despite these declines, national asking rents remain 60% above their pre-pandemic levels, led by the Northeast, where rents are now 92% higher than in the fourth quarter of 2019.
Construction Slowdown Keeps Industrial Vacancy Stable
New supply continued to slow in Q3 2025, helping keep vacancy rates steady nationwide. Just 63.6 million square feet of new industrial space was delivered during the quarter—a 32% decline from a year earlier—as developers focused increasingly on build-to-suit projects, which now account for nearly one-third of completions. Construction starts have also fallen below historical norms, pushing the pipeline down more than 13% year over year and reducing speculative activity.
With fewer speculative projects coming online, national vacancy held flat at 7.1%, marking the smallest annual increase since early 2023. Smaller warehouses remain the tightest segment, while large modern facilities benefited from major tenant move-ins and new build-to-suit deliveries.
Outlook
Industrial demand should remain focused on modern logistics facilities that support automation, higher power capacity, and advanced inventory management. Vacancy is expected to edge higher through mid-2026 as roughly 270 million square feet of new supply delivers, likely peaking in the low- to mid-7% range before stabilizing and gradually improving. The construction pipeline is projected to continue contracting as elevated interest rates and tariff pressures temper new starts, while build-to-suit activity remains steady as large occupiers pursue customized, high-efficiency space. Rent growth is anticipated to slow in the near term as markets rebalance, then reaccelerate in the second half of 2026 as supply tightens and leasing momentum strengthens.
Sources:
2025 Third Quarter Manufacturers’ Outlook Survey - NAM
U.S. Industrial MarketBeat Report | US | Cushman & Wakefield
2025 U.S. Real Estate Market Outlook Midyear Review | CBRE
United States Economic Forecast Q3 2025
Commercial Snapshot Q3 2025 | Old Republic Title
August 2025 Commercial Real Estate Market Insights
Phoenix Industrial Market Report | Kidder Mathews.
Los Angeles Industrial Real Estate Q3 2025Market
Leasing Activity Surge Signals Commercial Real Estate Recovery - CRE Daily
