The industrial sector is heading into 2026 with momentum and rising confidence, according to Newmark's most recent industrial market conditions and trends report.
The fourth quarter of 2025 delivered net absorption of over 60 million square feet, the strongest quarterly performance in two years and nearly matching roughly 70 million square feet in new deliveries. Leasing activity remained elevated, with momentum strongest in larger-box segments, though demand across smaller-size spaces also broadened, said Newmark.
Occupiers continue to favor modern, efficient facilities as they upgrade supply chains ahead of lease expirations. Out of 53 tracked markets, 44 posted positive absorption in Q4, with hubs such as Atlanta, Indianapolis and Chicago recording some of their highest quarterly leasing volumes in years, according to Newmark.
Annual totals show more modest results. Net absorption for 2025 fell 8.7% year-over-year to 159 million square feet, while deliveries dropped 30.4% to 280.7 million square feet. The construction pipeline stabilized at 282 million square feet, down 12.8% year-over-year, marking the lowest level under construction since 2018. Quarterly construction starts slowed 6.8% to 65.6 million square feet.
Warehouse construction costs remain elevated, influenced by inflation and ongoing tariffs. Much of the new and under-construction space is heavily pre-leased, reflecting both disciplined development and tenant preference for build-to-suit and modern speculative facilities.
Vacancy rates edged slightly higher to 7.5%, with the availability rate at 9.9%. Sublease space expanded to 230 million square feet, while average asking rents climbed 2.9% to $10.43 per square foot.
The 100,000-square-foot-and-under segment remains the market's foundation, with lower vacancy than larger spaces, which are now approaching peak levels near 8.6%, said Newmark. Elevated leasing activity and relatively flat rents have created favorable conditions for tenants to upgrade space, especially amid a wave of lease expirations, with the market showing more upside than downside for the first time in years.
Industrial investment remained strong, with sales volume up 12% year-over-year to $104 billion and the average sale price per square foot rising 1.4% to $141. Private buyers accounted for roughly half of all transactions and deals increasingly involved newer, larger-format properties.
Public market cap rates compressed nearly 10 basis points since April, while broader investor interest remains robust. Substantial manufacturing investment, supply-chain reconfiguration, and data center expansion continue to drive long-term industrial demand, with more than 350 million square feet delivered since 2020, the report said.
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