Small and mid-sized industrial buildings are maintaining far stronger occupancy rates than larger warehouses, according to Marcus & Millichap’s 2025 industrial report. Vacancy among properties in the 10,000- to 100,000-square-foot range was just 4.4% in March, well below the levels seen in large-scale warehouses and newer industrial facilities. Properties built before 2020 also remain tight in supply, with vacancies falling below 5%, in contrast to recently developed stock, where the category was up at 21%. This resilience positions owners of smaller and mid-sized spaces favorably during a period of changing demand.
The report noted that distribution space availability stood at 10.2% in April, but was significantly lower among properties exceeding 100,000 square feet at 6.5%. Much of the imbalance in vacancy rates is concentrated in larger facilities and new deliveries, as roughly three-quarters of ongoing construction involves projects over 200,000 square feet. By comparison, projects smaller than 100,000 square feet account for just 10% of the active pipeline.
Nationwide industrial availability overall has nearly doubled since reaching a record low in mid-2022, as developers expanded the inventory by nearly 13% since 2020. However, construction momentum has slowed considerably. In the first quarter of 2025, developers delivered 67 million square feet, the lowest three-month total in seven years. This pullback, expected to extend through next year, could help newly built vacant properties attract tenants. Some movement may also occur as high-credit tenants migrate out of older facilities toward newer spaces with modern features, the report said.
Certain industries are fueling demand for modernized space despite the uneven market. Roughly 100 semiconductor-related projects were underway as of June, with Arizona and Texas accounting for one-third of the total. The expansion of this sector is likely to spur future leasing activity from suppliers, logistics providers and other supporting firms seeking nearby facilities.
Financing remains a critical factor for future development. National banks provided one-third of all industrial construction lending in the 12 months ended in March, while regional and local lenders played the largest role in backing new warehouse projects. At the same time, funding conditions are tightening. With elevated vacancy in newer properties, lenders are expected to apply greater scrutiny to upcoming proposals. Even so, borrowers with proven track records of delivering and leasing institutional-quality assets in prime locations are still expected to command strong interest.
The long-term funding outlook is also tied to policy decisions. The $1.2 trillion Infrastructure Investment and Jobs Act, set to expire in September 2026, remains a pivotal source of support for port, airport, and rail expansion. Its potential reauthorization will be closely watched by industry stakeholders.
For now, smaller and mid-sized industrial property owners appear best positioned to weather the market recalibration, with vacancy rates well below those of larger warehouses. Their stability underscores the divide between traditional spaces that continue to fill quickly and the oversupplied, newer, large-scale warehouse segment, adjusting to the past five years of aggressive construction.
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