The industrial sector appears to have shaken off some predictions of a 2025 downturn and is instead forging ahead, riding into 2026 on strengthening fundamentals and improving momentum, with large users leading the way.
The year 2025 began with a deluge of new supply but a slowdown in demand.
“Net absorption, a key measure of demand for industrial space, reached 101 million SF in 2024 — a 34% drop from the previous year and 72% below the 2021 peak demand of 356 million SF. At the same time, developers delivered 202 million square feet of big-box space, twice the amount of demand,” Colliers reported in its forecast for the sector in 2025. It noted, however, that the gap could close in the year ahead.
A new report from Cushman & Wakefield suggests this change is underway.
“Stable vacancy, sustained leasing activity, moderating new supply, and a meaningful uptick in second-half absorption all point to a market transitioning toward healthier, more balanced growth,” the report noted, in spite of a cooling labor market and ongoing trade and tariff uncertainty.
In 4Q 2025, net absorption totaled 54.5 million square feet, 29% more than in 4Q 2024 and pushed absorption for the full year to 176.8 million square feet. Demand was driven by newer warehouse and logistics facilities, which consistently outperformed older, less functional assets.
“Occupiers prioritized automation-ready buildings with higher power capacity. Large users were a key contributor to this trend, with tenants occupying 500,000 square feet or more absorbing over 116 million square feet during the year,” noted Jason Price, senior director of America’s and head of logistics and industrial research.
Logistics demand remains domestic and population-center focused, driven by e-commerce fulfillment, essential goods distribution and retail replenishment. Leasing activity in the Southeast and Central regions also benefited from manufacturing-related demand.
Leasing rose 11% year-over-year to reach 165.7 million square feet in the fourth quarter and 665 million square feet over the full year. There were 43 signings for more than one million square feet, 30% more than in 2024. Six U.S. metros enjoyed more than 10 million square feet of positive net absorption, led by Dallas-Fort Worth, Indianapolis, Kansas City and Greenville.
Rent growth remained positive, though moderate. Average industrial rents edged up 0.8% quarter over quarter to $10.18 per square foot, up 1.5% year-over-year.
“Over the longer term, fundamentals remain compelling, with national rents up 53% over the past five years,” the report commented.
At the same time, industrial construction eased off. There was a 35% drop in new deliveries year over year to 281 million square feet – the lowest level in eight years. Speculative development declined while build-to-suit projects accounted for 40% of space under construction – a trend reflecting occupiers’ growing preference for customized, high-performance logistics facilities.
Lower supply helped stabilize vacancy at 7.1% for the second quarter in a row – a modest 50 bps increase that suggested vacancy might be approaching its peak. Vacancy fell in both the Midwest and South, though it rose slightly in the Northeast and West. Smaller-bay units were in the tightest supply and there were signs of improvement in big-box vacancy in the second half of the year.
However, infrastructure constraints, especially access to reliable power, have become a growing problem as they alter development timelines, site selection and asset performance.
Nevertheless, the industrial market is entering 2026 from a position of strength.
“Stable vacancy, sustained leasing activity, moderating new supply, and a meaningful uptick in second-half absorption all point to a market transitioning toward healthier, more balanced growth,” stated Jason Tolliver, president of logistics & industrial services.
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