U.S. Industrial Market Shows Renewed Momentum Heading Into 2026

The U.S. industrial real estate market ended 2025 on stronger footing, with improving fundamentals and renewed momentum carrying into 2026, according to a new report from Cushman & Wakefield.

“During the last quarter, demand growth was led by newer warehouse and logistics facilities, which consistently outperformed older, less functional assets,” said Jason Price, Senior Director and Americas Head of Logistics and Industrial Research. “Occupiers are prioritizing automation-ready buildings with greater power capacity, and large users played a significant role in this trend, with tenants occupying 500,000 square feet or more absorbing over 116 million square feet during the year.”

Market Balance Improving

Stable vacancy levels, sustained leasing activity, slowing new supply, and a notable increase in second-half absorption indicate the market is transitioning toward healthier, more balanced growth.

Demand Accelerated Late In 2025

Despite a cooling labor market and continued trade and tariff uncertainty, industrial demand strengthened in the second half of 2025. Net absorption reached 54.5 million square feet (msf) in the fourth quarter—up 29% year over year and consistent with third-quarter performance. This momentum lifted full-year absorption to 176.8 msf, a 16.3% increase over 2024 and the strongest six-month demand trend since 2023.

Leasing Activity Remained Robust

Fourth-quarter leasing totaled 165.7 msf, representing an 11% year-over-year increase. Full-year leasing reached 665 msf, the highest annual total since 2022. Large transactions were especially influential, with 43 leases exceeding 1 msf signed in 2025—up 30% from the prior year. Market strength was broad-based, as six U.S. markets recorded more than 10 msf of positive net absorption, led by Dallas–Fort Worth, Indianapolis, Kansas City, and Greenville, all outperforming their 2024 results.

New Supply Continued To Slow

Construction activity cooled further, helping limit upward pressure on vacancy. Developers delivered nearly 281 msf of new industrial space in 2025, a 35% decline from 2024 and the lowest annual total since 2017. Fourth-quarter deliveries fell to 65.7 msf, down 24% year over year. The supply mix also shifted, with speculative development representing a smaller share of completions and build-to-suit projects accounting for 40% of space currently under construction—reflecting occupiers’ preference for customized, high-performance facilities.

Vacancy Stabilized

National vacancy held steady at 7.1% for the second consecutive quarter, suggesting the market may be approaching its peak. Year over year, vacancy increased by just 50 basis points, the smallest annual rise since late 2022. While vacancy edged higher in the Northeast and West, it improved across the Midwest and South. Smaller-bay industrial space remained the tightest segment nationwide, while big-box vacancy showed signs of improvement in the second half of the year following a midyear peak.

Long-Term Demand Drivers Remain Intact

Structural factors continue to support the sector’s resilience. The majority of U.S. logistics demand is domestically focused and population-driven, supported by e-commerce fulfillment, essential goods distribution, and retail replenishment. Manufacturing-related demand also bolstered leasing in 2025, particularly in the Southeast and Central regions. Meanwhile, infrastructure limitations—especially access to reliable power—are increasingly shaping development timelines, site selection, and asset performance.

“With vacancy stabilizing and new supply slowing, the U.S. industrial market is entering 2026 from a position of strength,” said Jason Tolliver, President of Logistics and Industrial Services. “Occupiers are returning to the market with a clear focus on long-term efficiency, automation, and resilience—driving the strongest performance in modern, power-capable assets and in markets aligned with domestic consumption and manufacturing investment.”

Source: SDC Executive