Following years of frantic development and leasing activity, the industrial sector hit pause in 2025 amid oversupply absorption, slowing demand, and delayed decision-making. Additionally, asset quality, location and size were differentiators driving the category’s performance.
Experts told Connect CRE that last year’s activities represented more of a shift than a downturn, with the coming year highlighted by mostly positive fundamentals amid ongoing concerns and headwinds.
“Generally speaking, relative to a historical perspective, the industrial market in the United States is still on solid footing,” said Jeff Thornton, Executive Vice President of Centerpoint’s Central Region. “Fundamentally, we are not on a par with 2020 to 2022, but what we’ve been doing over the past three years is adjusting back to a more traditional environment.”
More Balance, Less Hysteria
The experts agreed with Thornton that 2025 was far removed from the frenzied building and leasing activities characterizing the post-pandemic period.
In fact, “the first half of the year was quite sluggish in demand, largely due to economic uncertainty,” explained JLL’s Senior Analyst, Industrial Research, Elizabeth Holder. That uncertainty was partly based on a confusing—and ever-evolving—tariff situation, which put industrial leasing decision-making on hold. However, “during the second half of the year, many users needed to make decisions, which contributed to the uptick in leasing,” Holder noted.
Jordan Nathan with Faropoint agreed with Holder’s assessment. “Demand softened as goods consumption normalized and inventories were right-sized,” added Nathan, the company’s Head of Corporate Investments.
The experts also explained that some industrial subsectors performed better than others. Luke Huberman, vice president and director of acquisitions with BLT Enterprises, placed specialized industrial and flex properties onto the positive performer list. “These were supported by thinner development pipelines, diverse tenant demand and layouts that cater to light manufacturing, service users and last-mile distribution,” he commented.
BKM Senior Managing Director of Asset Management, Mason Waite, said that the top activity among smaller industrial facilities stemmed from constrained supply. This meant that “owners were better able to hold lease rates and transact more on landlord terms,” Waite noed.
The story has been different with the larger big boxes, many of which underperformed due to “elevated levels of speculative development, leading to rising vacancies and increased competition, especially in overbuilt markets,” Huberman observed.
Additionally, performance was bifurcated by asset class. Said BGO’s Steve Reents: “Industrial performance in 2025 was driven by a continued flight to quality, with newer Class A buildings outperforming older, functionally inferior assets.”
Reents, who is Managing Partner, Deputy Head of U.S., and U.S. Chief Investment Officer, pointed out that demand also focused on facilities built before 2020, which offered modern features such as higher clear heights, ample trailer parking, cross-docking considerations, and immediate power availability.
Then there was the geographic factor. “Markets less exposed to trade volatility outperformed port-dependent regions, while inland and domestically oriented logistics hubs demonstrated stronger rent growth and overall fundamentals,” Reents said.
Finally, facility use played a key role in the past year’s metrics. “Although tenants were affected by macro and tariff uncertainty, business parks aren’t typically very logistics-heavy; therefore, rents did not bottom out as they did in other industrial sectors,” said Michael Mullahey, vice president of acquisitions with MCA Realty.
Overall, the industrial professionals weren’t alarmed over 2025’s results, pointing out that “the past year was largely a return to normal levels, rather than a true downturn,” observed Northmarq Regional Manager Ryan Butler.
At the same time, “performance was primarily driven by supply imbalance and suite-size mismatch, not overall sector health,” Nathan commented.
A Deep Dive Analysis
Using 2025 as their base year, the experts provided insights as to how the sector might operate in the following categories during 2026.
The Supply
As mentioned above, the industrial supply pipeline has tightened and will continue to do so in the coming year. Huberman pointed out that much of today’s activity involves core markets and pre-leased projects. As a result, “core logistics hubs are expected to reach equilibrium sooner, while some secondary markets may take longer as tenants and capital remain discerning,” he said.
Additionally, assuming additional cuts in the federal funds rate, the focus on land acquisitions and building could increase “as development yield improves, relative to borrowing costs,” Holder predicted.
Still, Butler described the coming year as uneven in terms of supply. Overbuilt markets will focus on absorbing existing inventory, while markets with limited vacancy and strong demand will be targets for new development. “This should lead to gradual rebalancing, but the timeline will vary significantly by market,” he added.
The Risks
Oversupply is one risk in the coming year. Investors, owners and occupiers are also eyeing the following challenges.
Macroeconomic. Butler indicated that an economic slowdown or recession could impact consumer buying behavior. If there is a pullback in spending, “some industrial tenants may delay expansion decisions or reduce space needs, following more traditional cost-cutting behavior,” he said.
Interest Rates and Capital. “Interest rate uncertainty could continue to pressure valuations and limit transaction activity,” Huberman explained. Disruptions in capital markets “could also temporarily slow leasing and transaction activity,” Nathan pointed out.
Trade. Holder acknowledged that the current trade environment and tariff strategies are somewhat stable. However, “this balance is incredibly fragile,” she said, adding that heightened geopolitical tensions could impact trade routes and energy markets, throwing supply chain planning into disarray.
In short, “headwinds include oversupply in non-major markets, uncertainty around macroeconomic policies in the United States, and the geopolitical environment globally,” Thornton summarized. “We don’t know what those things will look like this year, and that uncertainty creates a problem, which is effectively the headwind.”
The Forecasts
The experts’ 2026 predictions varied overall. Reents said BGO’s outlook for the sector is favorable in the coming year and beyond, while MCA Realty’s Mullahey expressed optimism amid manufacturing and artificial intelligence leasing. JLL’s Holder said she also anticipates positive momentum, “fueled by the ongoing manufacturing renaissance and the modernization and diversification of U.S. supply chains.”
Others were more cautious with their assessments, with Waite of BKM noting that the 2026 outlook isn’t quite as uniform as in previous years. “The market is simply more nuanced than in prior years, and performance will depend heavily on submarket selection and size-range dynamics,” he said.
Huberman, with BLT Enterprises, agreed, adding that demand for functional, well-located assets will be resilient, with “performance increasingly differentiated by asset quality, location and functionality.” Meanwhile, Faropoint’s Nathan indicated that fundamentals should stabilize, rather than accelerate, with performance “increasingly segmented by suite size and submarket.”
Thornton with Centerpoint added that, while things should improve in 2026, macroeconomic uncertainty—including higher tariffs and a labor market slowdown—could exert pressure on industrial performance. “This uncertainty around the macroeconomic environment and spending levels creates uncertainty in demand, which is not good for our business,” he added. “We think the near-term will continue to be a little bumpy.”
Northmarq’s Butler summarized others’ insights by suggesting that industrial will remain a sought-after sector in the coming year, aided by robust fundamentals and long-term demand drivers. “That said, like the broader investment landscape, we anticipate continued volatility and choppy conditions as capital markets adjust,” he added.
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