Industrial Real Estate Demand Surges In Q3 2025

Demand for U.S. industrial real estate surged in the third quarter of 2025, marking the strongest performance since early 2023, according to Colliers.

Net absorption — the measure of change in occupied industrial space — climbed to 60 million square feet in Q3, up nearly 20 million square feet from the same period last year. Although quarterly demand strengthened, year-to-date net absorption remains slightly below levels reported for the same timeframe in 2024. The strongest gains were recorded in Phoenix and Indianapolis, where robust big-box leasing activity, build-to-suit projects, and large-scale user sales fueled growth.

Vacancy and Supply Trends

The national industrial vacancy rate reached 7.4% in the third quarter, an increase of 72 basis points year over year. Analysts expect tightening supply and strong tenant demand to help stabilize vacancies in the coming quarters as the market regains momentum.

Industrial space under construction fell to 270 million square feet in Q3 — the lowest level since 2018. However, markets such as Dallas–Fort Worth and Houston continue to see construction upticks. Colliers noted that this shift reflects a more balanced development pipeline, with new projects increasingly focused on markets demonstrating consistent tenant demand.

Industry Outlook and Long-Term Strategies

The resurgence in demand comes as companies grow more confident in making long-term real estate decisions, even amid ongoing tariff-related uncertainty, said Dan Letter, President of Prologis, during an October earnings call.

“Customers have become more desensitized to short-term noise as they plan for the long term,” Letter stated. “It’s encouraging to see well-capitalized large companies leading the way — smaller and mid-sized firms tend to follow their lead.”

Prologis reports particularly strong interest from e-commerce businesses and companies reinvesting in supply chains to improve service levels and control costs. Recent announcements from firms such as Dollar Tree and Ahold Delhaize, along with New Balance’s new distribution facility in Salt Lake City, underscore the sector’s renewed momentum.

Source: Index Box