Build-to-suit and owner-used projects have been major contributors to the cheering news in the industrial sector's significant increase in net absorption and expected decline in vacancy.
In 4Q 2025, net absorption rose to its highest quarterly total since 2Q 2023, reaching 58.7 million square feet. Year-over-year, it soared 18% to 161.1 million square feet, according to JLL's new report on industrial market dynamics
The primary beneficiaries were Dallas-Fort Worth, Phoenix, Houston, Columbus and Indianapolis, which together swallowed up about half (49.8%) of the total. In general, gateway markets like Chicago, the Inland Empire, New Jersey, Los Angeles and Houston enjoy the largest concentration of leasing activity, representing 38.8% of annual leasing volume.
As more companies demand custom facilities tailored to their specific requirements or location, build-to-suit and owner-used projects will account for a growing share of absorption and improve market fundamentals, according to JLL.
Even though the annual vacancy rate rose 40 basis points to 5.1% from 2024, in the fourth quarter it fell by 10 basis points to 7.5% and the downward trend is expected to continue as new facilities are absorbed. Class A warehouses of 100,00 to 249,000 square feet have the highest vacancy rate at 15.8%, while Class A facilities over a million square feet have the lowest rate at 8.1%.
Another positive sign: leasing activity held steady at 146 million square feet in 4Q 2025. For the year, it rose 8.4% to 533.2 million square feet. As usual, 3PL users dominated the field and are expected to continue to do so, as companies prefer to focus on their core business and outsource their logistics operations. In 3Q 2025, 3PL providers handled 12.7% of leasing and 15.8% for the year.
There has also been a significant jump in leasing construction materials and building fixtures. In the last five years, it rocketed by 66.8%, driven more by data centers and core infrastructure projects than by industrial construction. Data center capacity is predicted to double by 2030.
Leasing activity by logistics and distribution tenants rose 53.8%.
There were also signs of caution. The 2025 development pipeline slipped to 259 million square feet, the lowest since 2018. There was a marginal increase to 253.7 million in industrial buildings under construction, with 40% of them built-to-suit or owner-occupied. Among speculative buildings under construction, only nine were mega-box facilities over one million square feet. In contrast, 332 spec buildings of 100,000 to 250,000 square feet were under construction.
At the same time, both manufacturing deliveries and the overall pipeline declined. Deliveries fell 37.7% in 2025 compared to 2024 and the development pipeline fell by 7.6%.
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