The industrial market is entering a period of transition. Vacancies are rising, tenant expectations are evolving and the space that opened up during the last few years is finally experiencing absorption. And while the sector continues working through the backlog of inventory, signs of new activity are creating change.
“I would characterize the general national industrial market as coming off its lull, and we’re now riding back up again,” says David Pinsel, managing partner and national industrial leader at SRS Real Estate Partners. “There was a time when tenants’ expectations and landlords’ expectations were quite far apart. And what we’ve seen over the past 90 days or so is that the gap has closed.”
These shifts are impacting how owners and occupiers plan their strategies, and understanding where expectations have aligned and where uncertainty remains is helpful for making decisions in the coming months. Pinsel notes that SRS’ rapidly expanding industrial platform—which has added substantial talent across the country—has provided the firm with a real-time vantage point into these changing dynamics across markets.
Expectations Narrow as Vacancy Rates Reach 7.7%
Throughout much of the year, the gap between tenant and landlord expectations influenced the market, but according to Pinsel, that gap has narrowed over the past few months. Even with that improved alignment, Pinsel notes the market is still working through a significant amount of space that opened up during the pandemic.
“We still have a high vacancy rate,” says Pinsel. “We’re at 7.7% now, which is the highest it’s been since 2013. So we’re still going through that digestion, but the trend is definitely on the upswing.”
Pinsel also notes that reshoring activity is influencing certain markets, and geopolitical uncertainty is prompting some companies to reposition operations. He shares that he works with tenants coming out of China that have scrapped plans to move into Mexico and are now looking to shift operations into the United States based on developments around tariffs.
Changing Demand Patterns Create New Openings for Owners and Occupiers
As activity returns, demand around assets is also shifting, according to Pinsel. “Those well-located modern buildings are experiencing really strong demand in 2025. And many of the functionally more obsolete buildings in B markets are sitting, and there’s certainly going to be some pain there.”
He adds that SRS is seeing these trends firsthand across its industrial platform, which has built significant momentum over the past year – notably in Southern California, where the firm now has one of its largest and strongest concentrations of industrial professionals in the country. That bench strength, combined with new talent in Phoenix, Atlanta and Florida, is giving SRS current, market-level visibility into how quickly demand patterns are evolving.
Third-party logistics (3PL) is another area getting traction. “Instead of tenants taking on massive space requirements, they’re going to increasingly sub out to 3PL to manage those fluctuations in demand,” Pinsel says.
Considerations around power will also be an important driver in the coming months.. He notes rising interest in locations with more favorable power and land conditions compared to higher-cost areas, such as Southern California.
Looking ahead to the new year, Pinsel notes that one of the most important factors impacting industrial demand will remain in clarity on tariffs. “There are many companies that have been waiting to make decisions, and as we get a resolution, I think you’re going to start to see additional movement in the market.”
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