The industrial market is entering a more stable phase in 2026, with vacancy holding steady, supply and demand returning to balance and construction activity beginning to rebound after a multiyear slowdown.
Average vacancy stood at 7.4% in the first quarter, up just 37 basis points year-over-year, the smallest annual increase since early 2023 and a marked slowdown from the triple-digit basis point gains recorded throughout much of 2023 and 2024, according to a Colliers report. The rate has remained largely unchanged over the past year, signaling that the surge in new supply is beginning to be absorbed.
Developers delivered 57 million square feet of new space in the first quarter, the lowest quarterly total since 2019 and a sharp pullback from the more than 100 million square feet delivered per quarter during the peak of the construction cycle. At the same time, net absorption reached 43 million square feet, up 36% year-over-year, keeping pace with new deliveries.
Nearly 70% of U.S. markets posted positive absorption for the quarter. The South continued to lead activity, accounting for 64% of total demand, with markets such as Atlanta, Dallas-Fort Worth, Houston and Charleston each exceeding 3 million square feet of net absorption. Atlanta led all markets with 7 million square feet, followed by Dallas-Fort Worth at 5.2 million and Phoenix at 4.8 million.
While national trends point to stabilization, regional differences remain. Vacancy rose most sharply in the Northeast, climbing 101 basis points year-over-year to 8.3% as move-outs outpaced leasing activity. In contrast, the Midwest posted the lowest vacancy rate at 5.4% and is among the furthest along in the recovery cycle, according to Colliers.
The development pipeline increased to 286 million square feet in the first quarter, up from 268 million square feet in the prior quarter, marking the first meaningful uptick after several quarters of decline. Activity remains concentrated in major logistics hubs, led by Dallas-Fort Worth and Houston, where developers are ramping up both build-to-suit and select speculative projects.
Meanwhile, rent growth has cooled. The average warehouse and distribution asking rent was $10.46 per square foot, down 0.5% year-over-year, as gains in some Sun Belt markets were offset by corrections in coastal markets that saw out-sized increases in recent years.
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