The U.S. industrial market at the end of 2Q 25 presents a mixed picture. On the one hand, national net absorption came in at 29.6 million square feet – above expectations, though 2.3% below the 30.3 million recorded in the first quarter. On the other hand, absorption remained below historical norms, and in some markets consolidation and downsizing outweighed demand, especially in the West led by the Inland Empire and Los Angeles.
Research from Cushman & Wakefield revealed a strong preference for newly built, modern logistics facilities and higher quality buildings: warehouse space completed since 2023 represented more than 50 million square feet of absorption in Q2.
There were 2.8% fewer industrial assets under construction in 2Q compared to 1Q as well as a 4.2% drop in completions, with 71.5 million square feet delivered in 2Q — more than two-thirds of it in the South and West. In spite of this, inventory increased, overall vacancy rose 2.7%, and absorption fell 2.3%. On the positive side, net rents rose 0.9% from $10.03 to $10.12 per square foot and new leasing increased by 3.4% to 156.9 million square feet. Seven markets exceeded five million square feet of leasing in the quarter while Dallas-Fort Worth and Chicago each leased more than 10 million square feet.
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Year-to-date compared to the same period in 2024, there was a 22% slump in buildings under construction and completions plummeted by 42%; overall absorption dropped 15.2% and vacancy rose 16.3%. There was better news on rents, which rose 2.5%, and on new leasing, which rose 0.3% to 309 million square feet.
“The share of build-to-suit (BTS) deliveries climbed to 30.4% year-to-date, up from 16.8% one year ago, as developers adjust to evolving tenant needs and a softening demand environment,” the report noted. The speculative share of facilities under construction dipped from 66% to 62.3% quarter over quarter – its lowest level since 2Q 2020. Declines in construction activity of 50% or more were experienced in 13 markets, down from 16 in the previous quarter.
Still, supply continued to outpace demand. The national industrial vacancy rate climbed to 7.1%, 10 basis points higher than the pre-pandemic average. However, warehouses under 100,000 square feet saw lower vacancy of 4.4%, up 80 basis points year-over-year, as well as higher rents averaging $13.51 – 31% above larger facilities.
Nationally, rents grew by 2.6% to $10.12 on an annual basis. The exceptions were the Northeast and West, which both showed year-over-year declines.
Despite the complexities, demand for logistics space remains resilient, the report said.
“Many companies accelerated imports to manage tariff exposure, prioritizing agility and flexibility in their supply chains. This is driving a noticeable uptick in activity beginning in June, as occupiers moved quickly during a window of lighter tariff pressure,” said Jason Tolliver, President, Logistics & Industrial Americas at Cushman & Wakefield. “Looking forward, market fundamentals are expected to strengthen, with demand gradually improving and supply falling rapidly. For tenants the next 6 to 12 months may present the best opportunity to secure favorable lease terms.”
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