The U.S. industrial real estate market continues to shift in favor of tenants as vacancy rises for the thirteenth consecutive quarter. In the fourth quarter of 2025, national vacancy reached 7.6%, driven by new supply continuing to outpace demand and leasing velocity slowing further. This trend is expected to persist into 2026 as construction completions taper off and absorption remains soft.
Year-over-year rent growth remains at 1.3%, a good sign for tenants who have been concerned with increasing rental rates. However, pandemic-era rent spikes mean many renewals are still occurring at higher rates after being marked to market. This trend is most evident in the small-bay industrial segment, where limited new development has kept vacancy near pre-pandemic lows of 5%. In contrast, logistics facilities between 100,000 and 500,000 SF have expanded by more than 14% over the past four years, pushing vacancy to 10% — its highest level in over a decade.
Tenants, especially large logistics users, will continue to benefit from increased leverage and landlord concessions. Smaller occupiers may face fewer options and rising competition for quality space as vacancy is expected to peak near 8% in 2026 before easing in 2027.
National industrial real estate trends
- National industrial vacancy rose to 7.6% in Q4 2025, driven by new supply outpacing demand.
- Small-bay industrial space remains limited, with vacancy below 5%.
- Year-over-year rent growth slowed to 1.3%, the lowest level since 2012.
- Quarterly net supply additions are on pace to fall below the pre-pandemic three-year average through early 2026, with annual supply additions set to hit a 10-year low by year-end.
- Industrial construction starts have fallen to 10-year lows after peaking in 2022, signaling a similar low in new completions by early 2026.
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Information contained in this report is provided, in part, from third-party sources, including the U.S. Bureau of Labor Statistics, the Bureau of Economic Analysis, Engineering News-Record, and CoStar Group. Even though obtained from sources deemed reliable, no warranty or representation, expressed or implied, is made as to the accuracy of the information herein.
