For the data behind the commentary, download the full Q4 2025 U.S. Industrial Report.
Industrial Demand Was on the Upswing in H2 2025
Despite trade uncertainty, tenant demand strengthened in the second half of the year. Industrial net absorption exceeded 50 msf for two consecutive quarters—a milestone not seen since 2023. Fourth-quarter absorption reached 54.5 msf, 29% higher than the same quarter last year, and 53% of U.S. industrial markets posted annual absorption gains in 2025.
Larger users, often seeking modern logistics facilities to support automation and higher power requirements, drove most of the demand. Among properties built since 2020, 43% of net demand (116 msf) came from requirements of more than 500,000 square feet (sf). Major retailers, e-commerce firms, manufacturers, and third-party logistics providers dominated this segment.
Historically, key port-proximate markets capture 20-25% of annual net absorption. In 2025, however, maritime trade moderation reduced their share to just 13% of total demand. Instead, inland markets led demand: Dallas/Ft. Worth (31.1 msf), Indianapolis (13.7 msf), Phoenix (13.7 msf), Kansas City (11.8 msf), and Columbus (9.8 msf).
Overall Vacancy Remained Firm as Speculative Supply Slowed
The U.S. industrial vacancy rate held steady at 7.1% through the second half of 2025, supported by stronger demand, slower speculative supply and moderating sublease space availability. Vacancy edged higher by just 45 basis points (bps) YOY, the smallest annual increase in three years. In the fourth quarter, 53% of U.S. markets saw vacancy rates remain flat or decline quarter-over-quarter (QOQ).
Smaller industrial assets remain the tightest segment, with vacancy at 4.8%, while big-box warehouses (more than 300,000 sf) ended the year at 9.8%. After peaking midyear at 10.6%, vacancy in larger-format buildings tightened as new vacant deliveries slowed and demand improved, particularly from 3PL, manufacturing, food and beverage, and e-commerce users.
Industrial asking rent growth slowed to 1.5% YOY in the fourth quarter, the lowest growth rate since the first quarter of 2020. The deceleration was concentrated in the Northeast and West, where rents had surged earlier in the cycle (up roughly 100% and 60% from 2019 to peak). As demand softened and vacancy increased in 2025, rents fell by 3.8% in the Northeast and 4.5% in the West. While 40% of markets posted YOY rent declines, long-term growth remains elevated: One-third of U.S. markets saw rents rise more than 50% between 2020 and 2025, keeping costs high for tenants exiting leases of five years or more.
Industrial Completions Reached an Eight-Year Low
Elevated vacancy rates, higher interest rates, and modest demand helped slow groundbreakings in 2024, leading to just 280 msf of industrial deliveries this past year—the lowest annual total since 2017. Completions fell 35% YOY and were 25% below the 10-year average.
The under-construction pipeline has inched up over the past two quarters, reaching 268 msf after bottoming at 264 msf midyear. Build-to-suit (BTS) projects made up 29% of completions in 2025, up from 22% in 2024, as developers grew more cautious with speculative supply. As large industrial users prioritize customized facilities to meet operational and power requirements, BTS activity is likely to pick up. Currently, 40% of space under development is BTS (106 msf).
For the data behind the commentary, download the full Q4 2025 U.S. Industrial Report.
