U.S. Industrial Real Estate Demand Rose Through the End of 2025

U.S. industrial real estate showed continued strength in the third quarter of 2025, with net absorption reaching 45.1 million square feet, a 30% increase from the previous quarter and 33% higher than the same period in 2024. Year-to-date net absorption measured 108 million square feet, nearly matching the 109 million square feet recorded during the same period in 2024, according to Cushman & Wakefield’s Q3 2025 U.S. Industrial Report.

Industrial Demand Remains Resilient Despite Economic Headwinds

The U.S. industrial market maintained fundamental health in the third quarter despite challenges including cooling consumer spending, higher tariffs, policy uncertainty, and a softening job market. Quarterly net absorption climbed 30% from the previous quarter to 45.1 million square feet, marking the strongest demand reading in more than a year.

Absorption was positive in two-thirds of U.S. markets. Dallas-Fort Worth, Indianapolis, Houston, Central New Jersey, Phoenix, and Kansas City each recorded more than 3 million square feet of growth. Several markets that posted occupancy losses earlier in the year, including Atlanta, Central New Jersey, and San Diego, returned to positive territory in the third quarter. Nationwide, 12 markets recorded positive absorption of 2 million square feet or more, double the previous quarter’s total.

According to CBRE, e-commerce fulfillment, third-party logistics, and manufacturing sectors continue to drive demand for industrial space, particularly in markets with strong transportation infrastructure and proximity to major population centers.

James Moore’s real estate advisory team works with industrial property owners and investors to assess market conditions, manage operating costs, and structure investments that support long-term financial performance.

Flight-to-Quality Trend Drives Leasing Activity

The flight-to-quality trend remained evident in third-quarter leasing data. Large corporate users are optimizing their supply chain networks by consolidating operations into newer, high-utilization regional hubs. Buildings constructed since 2020 registered 196 million square feet of net growth year-to-date, while older, less functional facilities posted 88 million square feet of negative absorption.

This shift reflects tenant preferences for modern facilities with higher clear heights, better energy efficiency, and advanced loading capabilities. Newer buildings also offer improved functionality for automated systems and last-mile delivery operations, which have become more critical as e-commerce continues to grow.

For property owners holding older industrial assets, this trend presents challenges. Buildings that lack modern features may face higher vacancy rates and pressure on rental rates. Owners may need to consider capital improvements, repositioning strategies, or alternative uses to remain competitive.

James Moore provides tax planning and consulting services to help industrial property owners evaluate renovation projects, assess cost-segregation opportunities, and manage depreciation strategies to support capital investment decisions.

Rent Growth Moderates But Remains Positive

National asking rents averaged $10.10 per square foot in the third quarter, up 1.7% year over year. This represents a slowdown from the 4% growth recorded in 2024. Nearly 60% of U.S. markets posted year-over-year rent growth, with 9 markets reporting double-digit increases.

Rent declines were concentrated mainly in the West and Northeast, down 3.0% and 3.7% year-over-year, respectively. Despite these declines, national asking rents remain 60% above their pre-pandemic levels. The Northeast region leads with rents now 92% higher than in the fourth quarter of 2019.

Rent growth moderation reflects increased supply in some markets and tenants’ ability to negotiate more favorable lease terms. However, the slowdown also indicates a market that is stabilizing after several years of rapid growth.

Slowing Construction Keeps Vacancy Rates Stable

Just 63.6 million square feet of new space was delivered during the third quarter, a 32.5% decrease from a year ago. The share of build-to-suit products has risen steadily since late 2023, accounting for 31% of completions year-to-date. Only five markets posted more than 10 million square feet of new deliveries in 2025: Dallas-Fort Worth, Phoenix, Houston, Savannah, and the Inland Empire, down from 10 markets during the same period last year.

With construction starts below recent historical levels, the under-construction pipeline has fallen 13.4% year over year. The share of build-to-suit developments now accounts for 39% of the total pipeline, an increase from 34% one year ago.

The national vacancy rate remained stable at 7.1% quarter over quarter and was up just 70 basis points year over year, the smallest increase since early 2023. Three of the four regions saw minimal quarterly movement in vacancy, while the West region’s vacancy rate edged up 30 basis points to 7.8%.

By size segment, small-bay warehouses under 100,000 square feet remain the tightest, with a 4.6% vacancy rate. Larger facilities of 500,000 square feet and greater reported an 80-basis-point decline quarter-over-quarter to 9.9%, thanks to major move-ins and build-to-suit completions.

What These Trends Mean for Industrial Property Owners and Investors

The third-quarter data suggests that the U.S. industrial market is stabilizing after a period of rapid expansion and adjustment. Demand remains positive, but growth has moderated from the pandemic-era peaks. Rent growth is slowing, and vacancy rates are holding steady as new construction declines.

For property owners and investors, these trends point to a market that requires careful attention to asset quality, location, and tenant mix. Newer buildings in markets with strong demand fundamentals continue to outperform, while older facilities may face headwinds.

Understanding local market dynamics, tenant preferences, and supply pipeline trends will be essential to making informed investment and management decisions in the months ahead.

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