U.S. industrial fundamentals are entering a more selective phase of the cycle, as tenant preferences, supply constraints and shifting trade dynamics reshape demand patterns, according to Marcus & Millichap's mid-year 2026 industrial outlook.
After a brief disruption following the implementation of "Liberation Day" tariffs last April, when tenants returned a net 9.8 million square feet in the second quarter, leasing activity rebounded quickly. Over the subsequent nine months, tenants absorbed 142 million square feet nationwide, signaling that underlying demand for industrial space remains intact despite macroeconomic volatility.
A key driver of that recovery has been the strong performance of modern logistics assets. More than 270 million square feet of demand over the period was concentrated in properties built this decade, reflecting an accelerating migration of high-credit tenants away from older facilities. This flight to quality is expected to remain a defining theme in 2026 as technological requirements and operational efficiencies continue to favor newer space.
At the same time, this shift is placing increasing pressure on aging industrial stock, particularly buildings constructed before the 1980s. While some of these assets face structural obsolescence, increases in vacancy are expected to remain contained in certain segments, especially smaller last-mile facilities, which continue to benefit from sustained e-commerce-driven demand and limited availability.
Supply-side conditions are also tightening. After expanding at an average annual rate of 2.3% over the past five years, industrial inventory growth is projected to slow to just 1% in 2026. The active development pipeline currently stands at 345 million square feet, representing 1.8% of existing inventory, with more than 70% of near-term deliveries already pre-leased. With just 62 million square feet scheduled for completion beyond this year, construction momentum is clearly easing.
This slowdown in new supply is expected to support existing vacancy absorption, even as older, less-efficient properties face continued leasing challenges. Recent data also indicates a 13% decline in construction starts during the October 2025 to March 2026 period compared with the prior six months, reinforcing the view that development activity is cooling.
Macro-level pressures remain in focus as well. Elevated shipping costs tied to geopolitical tensions have increased transportation expenses across key trade corridors, with freight costs from East Asia to U.S. ports rising sharply in recent months. Meanwhile, uncertainty surrounding the future of federal infrastructure funding adds another layer of potential constraint for logistics and transportation expansion.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.