Following quarters of uncertainty based on consumer sentiment, a softening job market and shifting tariff policies, industrial occupiers decided to come off the sidelines in Q3 to take space.
Analyses from commercial real estate firms reported that absorption was on the rise from the previous quarter, while vacancies remained somewhat steady in the face of ongoing (but dwindling) deliveries.
“Industrial occupiers reached an inflection point where operational needs outweighed caution, compelling them to secure space they could no longer delay,” explained JLL’s Market Dynamics: Industrial Market Statistics Trends writeup. This, in turn, led to the gap between supply and demand narrowing, “signaling greater market stability toward the end of the year,” CBRE’s U.S. Industrial Figures pointed out.
Furthermore, “tenant demand surged to its highest level since Q1 2023. On the other hand, supply deliveries have been muted,” according to Colliers’ U.S. Industrial Market Statistics analysis.
On the other side, Lee & Associates’ North America Market Report wasn’t so optimistic, indicating that while net absorption did increase, “demand was weak and failed again to keep pace with the supply of new buildings.” At the same time, “tenant growth remained hobbled by tariff concerns and interest rates,” the Lee & Associates analysts said.
Modern and New
One trend has been a flight to quality. Cushman & Wakefield’s Industrial MarketBeats pointed out that “large corporate users are optimizing their supply chain networks by consolidating operations into newer, high-utilization regional hubs.” CBRE and JLL agreed with this assessment.
“Class A properties with contemporary features, efficient layouts, and strategic locations continue to command significant premiums and attract the majority of leasing activity,” JLL analysts said. At the other end of the spectrum is older industrial stock, which is “facing increased pressure as tenants prioritize modern facilities,” the JLL report added.
Size Matters
Not all industrial product is created equal, and this proved to be true in Q3. Lee & Associates explained that higher vacancies have impacted larger buildings, specifically those exceeding 100,000 square feet. “Buildings smaller than 50,000 square feet are in most demand,” the analysts said.
The CBRE report stated that leasing was limited for larger facilities exceeding 700,000 square feet, while facilities between 100,000 and 300,000 square feet reported the largest year-over-year increase.
Cushman & Wakefield analysts added their own viewpoint, which is that small-bay warehouses under 100,000 square feet had the tightest vacancy rate. In comparison, larger facilities of 500,000 square feet and above reported a somewhat higher rate.
The Crystal Ball: Q4 and Early 2026
The outlook from the end of the year to 2026 calls for continued slowing of construction activity and vacancy compression. Said JLL: “A disciplined development strategy, combined with lengthy permitting and construction timelines, suggests that meaningful supply additions will remain constrained well into 2026, supporting the ongoing market rebalancing.”
Speaking of construction, CBRE analysts indicate that the current space being built accounts for 0.7% of existing inventory. “The low amount of available first-generation space slated for completion in 2026 is expected to keep the vacancy rate stable,” the JLL analysts added.
Also steadying? Rents. Colliers analysts are forecasting stabilization in the coming quarters as rent growth “returns to long-term historic trends.”
Meanwhile, Cushman & Wakefield said that demand will likely be concentrated in modern facilities, while “vacancy is expected to rise before stabilizing.”
One reason is the slow construction starts, which are anticipated to continue into 2026. Still, build-to-suit activity should remain healthy as large corporate occupiers seek customized, efficient space,” Cushman & Wakefield analysts noted.
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