Demand For Newer Industrial Assets Hits Multiyear High

Demand for modern, large-format industrial facilities is accelerating, fueled by corporate occupiers and third-party logistics providers (3PLs), according to Cushman & Wakefield’s latest report.

Net absorption in the second half of 2025 was dominated by warehouse and logistics properties completed since 2020, representing the strongest performance in more than a decade following a slowdown in 2023 and 2024.

Leasing activity for spaces larger than 500,000 square feet rose 32% year over year, with 3PL and manufacturing tenants accounting for 63% of transactions. The trend reflects continued supply chain recalibration amid higher real estate costs and softer consumer demand. Altogether, 113 million square feet of net absorption occurred within these newer, large-scale properties, making up 64% of total year-to-date absorption nationwide.

A major driver behind this growth is a “flight to quality,” as companies consolidate operations from aging, smaller facilities into Class A buildings that offer greater clear heights and enhanced power capacity to support automation and robotics.

Build-to-suit (BTS) development is also gaining traction, giving tenants the flexibility to customize facilities around operational needs. Nationwide BTS activity increased 11% last year, and 19% of leases exceeding 500,000 square feet were tied to BTS projects. Projects of that size currently under construction climbed 14% year over year—the highest level since early 2024—positioning BTS as a key contributor to absorption heading into 2026.

Cost considerations are influencing market selection. Of the 104 large leases signed in 2025, 71% were completed in markets with rents below the national average of $10.18 per square foot, and 63% occurred in areas priced at least 20% below that benchmark. Many tenants are increasingly favoring more affordable inland markets over higher-cost coastal regions, where rents can range from 10% to 65% above the national average.

Vacancy rates for large warehouse properties declined by 140 basis points year over year. At the same time, user-purchase activity surged to 36.7 million square feet in 2025—the highest level of the decade and 68% above 2024 totals—as limited speculative supply drives retailers, 3PLs, and e-commerce companies to purchase facilities outright.

With demand rebounding and the development pipeline near an eight-year low, the report suggests conditions are in place for continued occupancy gains and upward rent pressure, particularly for high-quality industrial assets. In high-demand markets, developers are already initiating new big-box projects, while investor appetite for strategically located, modern warehouses continues to strengthen.

Source: GlobeSt