The U.S. industrial market is shifting toward renewed growth, with balanced supply and demand helping stabilize vacancy and an increasing focus on sustainable development in the strongest regions, according to Colliers’ third-quarter industrial report.
Net absorption reached 60 million square feet in Q3, the highest quarterly total since early 2023, matching new supply and signaling strong tenant activity. Year-to-date net absorption stands at 118 million square feet, slightly below the 123 million square feet recorded during the same period last year.
Markets posting particularly strong absorption include Phoenix and Indianapolis, each exceeding seven million square feet, driven by big-box activity, build-to-suit deliveries and large user leases. Other notable markets include New York City (six million), Greenville-Spartanburg (5.1 million), Dallas-Fort Worth (4.2 million), Norfolk (3.7 million), Savannah (3.2 million), Nashville (3 million) and Denver (2.7 million).
Overall vacancy rose 72 basis points to 7.4%, the smallest quarterly increase since Q4 2022, suggesting the market may be near its cyclical peak. Regionally, the Northeast experienced the largest increase, up 146 basis points year-over-year to 8%, while the Midwest remains the tightest at 5.5%, up just six basis points. In the South, vacancy climbed to 8.5% (+70 bps), and in the West, it rose to 7.7% (+103 bps).
Vacancy is projected to stabilize as demand remains strong and new supply stays limited. New industrial construction is cooling, with 270 million square feet in the pipeline—the lowest level since 2018. Q3 deliveries totaled 65 million square feet, the lowest since Q1 2021, compared with more than 100 million square feet per quarter during the prior construction boom. Deliveries are expected to bottom out in the coming quarters, with new starts gradually increasing, particularly in markets with lower vacancy, such as Dallas-Fort Worth, Houston, Richmond, Jacksonville and Minneapolis-St. Paul.
Warehouse and distribution rent growth has moderated, increasing just 2% year-over-year to an average of $10.35 per square foot. Some markets have seen declines, including Los Angeles, down 11% to $14.87; New York City Metro, down 2% to $16.78; and the San Francisco Bay Area, down 2% to $14.78. Philadelphia remained flat at $11.16, while Houston rose 5% to $9.59. Dallas-Fort Worth saw a 4% decline to $9.33, Atlanta increased 1% to $8.57, Chicago rose 4% to $8.14 and Detroit increased 2% to $7 per square foot.
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