Small-scale industrial properties are emerging as a resilient segment in the U.S. industrial market, as large facilities bear the brunt of a broader development slowdown. According to CommercialCafe’s latest U.S. industrial market report, construction of facilities under 100,000 square feet rose 16% year-over-year, with 340 new projects breaking ground. In contrast, larger facilities — those exceeding 100,000 square feet — saw construction activity drop by more than half over the same period.
Lower-square-footage properties have benefited from shifts in supply chain strategies, urban logistics and changing consumer expectations. Sustained tenant demand has supported rising prices, with the average sale price for small industrial buildings increasing 10.6% year-over-year, compared with a 3.5% gain for larger properties.
“Our industrial real estate report indicates that the small-scale industrial sector will remain in favor in the coming years,” said CommercialCafe.
“As consumer demand for same-day delivery grows, well-positioned urban infill locations offer the most flexible solution for investors and developers.”
Nationally, in-place rents for industrial properties grew 5.7% annually to $8.73 per square foot, though lease spreads shrank in several markets. Miami led rent growth among major U.S. industrial markets at 8.9% year-over-year, driven in part by the Port of Miami’s role in trade with Latin America and the Caribbean. Meanwhile, the national industrial vacancy rate rose 240 basis points in October to 9.6%, reflecting elevated deliveries over the past few years.
Across the U.S., nearly 353 million square feet of industrial space is under construction, or about 1.7% of current stock. More than half of recent starts have been data center properties, with Atlanta emerging as a hotspot for cloud and AI-related facilities. Year-to-date industrial transactions total $61.8 billion, averaging $136 per square foot and the report forecasts a strong finish to 2025 as interest rate cuts and end-of-year activity spur deals.
Regional trends vary. In the West, rent growth is slowing, with several markets near peak vacancy levels. Denver, the Central Valley and Portland saw no month-over-month vacancy changes but recorded significant year-over-year increases, with Denver at 13.4% — the nation’s loosest major market. Conversely, Midwestern markets such as Minneapolis-St. Paul, Cincinnati and Indianapolis are accelerating construction, supported by lower rates and cost advantages. Chicagoland maintains the Midwest’s largest pipeline at 11.3 million square feet.
In the South, industrial expansion continues, though only Houston, Nashville and Atlanta posted vacancy rates below the national average. Charlotte and Miami recorded the region’s largest year-over-year increases in vacancies. Meanwhile, New Jersey and Boston remain tight but expensive, with average rents of $12.12 and $11.52 per square foot, respectively.
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