US Industrial Market Gains Strength as Vacancy Stabilizes

The US industrial real estate market closed 2025 with improving fundamentals and building momentum, according to Cushman & Wakefield’s fourth-quarter report. Stable vacancy rates, increased leasing activity, and declining new supply point toward a more balanced market as manufacturers and logistics operators make strategic facility decisions.

Net absorption reached 54.5 million square feet in the fourth quarter, up 29% from the same period in 2024. Full-year absorption totaled 176.8 million square feet, a 16.3% increase over 2024 and the strongest six-month demand trend since 2023. This performance occurred despite labor market cooling and ongoing trade uncertainty.

Leasing Activity Reaches Three-Year High

Fourth-quarter leasing totaled 165.7 million square feet, an 11% year-over-year increase. Full-year leasing reached 665 million square feet, the highest annual total since 2022. Larger transactions drove much of this activity, with 43 leases exceeding one million square feet signed in 2025, a 30% increase from 2024.

Six US markets recorded more than 10 million square feet of positive net absorption, led by Dallas-Fort Worth, Indianapolis, Kansas City, and Greenville. These markets posted stronger results than in 2024, reflecting broad-based demand across regions.

For manufacturers evaluating facility expansions or relocations, understanding regional leasing trends helps identify markets with available modern space and competitive lease terms.

New Construction Drops to Eight-Year Low

Developers delivered 281 million square feet of new industrial space in 2025, down 35% from 2024 and the lowest annual total since 2017. Fourth-quarter deliveries fell to 65.7 million square feet, a 24% decline year over year. This slowdown helps prevent further upward pressure on vacancy rates.

Build-to-suit projects now account for 40% of the space under construction. This shift reflects occupiers’ growing preference for customized, high-performance logistics facilities rather than speculative development.

The composition of new supply matters for manufacturers planning capital investments. Understanding whether markets favor build-to-suit or speculative development affects timing decisions and negotiation positions when securing new space.

Vacancy Stabilizes at 7.1% Nationally

National vacancy held steady at 7.1% for the second consecutive quarter, suggesting the market may be nearing peak vacancy. Year-over-year, vacancy rose by just 50 basis points, the smallest annual increase since late 2022. While availability increased modestly in the Northeast and West, vacancy improved in both the Midwest and South.

Smaller-bay industrial product remained the tightest segment nationwide, while big-box vacancy improved in the second half of the year. This stabilization benefits manufacturers seeking space, as balanced vacancy rates typically support more predictable lease terms and reasonable negotiations.

Modern Facilities Drive Demand Growth

Newer warehouse and logistics facilities consistently outperformed older assets as occupiers prioritized automation-ready buildings with higher power capacity. Large users occupying 500,000 square feet or more absorbed over 116 million square feet during the year.

Infrastructure constraints, especially access to reliable power, are emerging as critical factors shaping development timelines and site selection. Manufacturers implementing automation or advanced manufacturing processes should factor power availability into facility planning, as these requirements increasingly influence operational efficiency and long-term costs.

Manufacturing output growth in key industrial markets supports continued demand for modern logistics space that can accommodate advanced production requirements.

Rent Growth Moderates But Remains Positive

Average US industrial asking rents rose to $10.18 per square foot, up 0.8% quarter over quarter and 1.5% year over year. While rent growth continues to moderate, national rents remain up 53% over the past five years, reflecting the sector’s structural strength.

For manufacturers managing facility costs, understanding rent trends helps inform lease renewal negotiations and expansion budgeting. Markets with moderating rent growth may offer opportunities for favorable lease terms compared to peak pricing periods.

Domestic Demand Anchors Market Performance

Most US logistics demand remains domestic and population-centered, anchored by e-commerce fulfillment, essential goods distribution, and retail replenishment. Manufacturing-related demand also supported leasing activity in 2025, particularly in the Southeast and Central regions.

This domestic focus provides stability for manufacturers with distribution networks tied to US consumption patterns. Markets aligned with domestic manufacturing investment and population growth offer advantages for long-term facility planning.

Manufacturing Facility Planning Considerations

The industrial real estate market’s stabilization creates opportunities for manufacturers to secure well-located, modern space without the urgency that characterized previous years. Slowing deliveries and disciplined development support continued market balance as manufacturing activity adjusts to changing economic conditions.

Want more clarity on how facility costs and location decisions affect your bottom line? Our team helps manufacturers analyze cost structures and plan capital investments with confidence. Contact us today.

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