The economic actual property market throughout the U.S. is coming into a brand new part of stability after years of explosive progress. In keeping with Colliers, the 25 largest U.S. industrial markets now account for 76% of the nation’s whole industrial stock, persevering with to drive nationwide tendencies regardless of a notable slowdown in development and leasing exercise.
Provide Shrinks, Emptiness Stabilizes
The development pipeline has tightened considerably, with new industrial provide down 63% over the previous yr within the largest 25 markets. As of Q1 2025, emptiness charges have climbed extra progressively, reaching a median of 6.9% — up simply 88 foundation factors from final yr. Internet absorption, a key demand indicator, totaled 18 million sq. toes within the prime 25 markets within the first quarter, as demand and provide start to degree out.
In a number of markets the place speculative development surged, emptiness charges are anticipated to stay elevated for an extended interval. Nevertheless, most markets are projected to hit peak emptiness by year-end as new development slows additional.
Development Pipeline Contracts Sharply
After years of fast growth fueled by post-pandemic demand, industrial stock progress has cooled. Nationwide, area underneath development dropped 61% from its 2022 peak, falling to 279 million sq. toes in Q1 2025, which is the bottom degree since 2018. The biggest 25 markets accounted for 68% of that pipeline, or roughly 188 million sq. toes.
By year-end, development is predicted to shrink additional, dipping beneath 250 million sq. toes nationally. In lots of markets, quarterly new provide might hit ranges not seen since 2015.
Phoenix led all markets in stock progress, including 35.7 million sq. toes over the previous yr for an 8.6% year-over-year improve. Nevertheless, its emptiness fee additionally climbed to a 13.2%, as new deliveries outpaced demand.
New Provide Drops, Key Markets Keep Energetic
New provide nationwide totaled 65 million sq. toes in Q1 2025 — a 48% decline year-over-year. The biggest 25 markets noticed a good steeper 50% drop to 41 million sq. toes. Phoenix delivered probably the most new area (7.4 million SF), although nonetheless 23% beneath final yr’s tempo. Dallas-Fort Value noticed the sharpest decline, with only one.5 million sq. toes delivered in Q1 — down 90% from a yr earlier.
Some Midwest markets, resembling Chicago, Minneapolis-St. Paul, Cleveland, Kansas Metropolis and St. Louis, have seen tenant demand outpace new provide, serving to preserve emptiness ranges extra secure.
Emptiness Charges Method Peak Ranges
Nationwide, industrial emptiness rose for the eleventh straight quarter, reaching 7.1% — up 93 foundation factors over the previous yr. Nevertheless, emptiness elevated at its slowest tempo since late 2022, signaling that the market could also be approaching peak emptiness.
Amongst main metros, Phoenix stays probably the most oversupplied, whereas emptiness decreased over the previous yr in Cincinnati, Chicago, Houston and Minneapolis-St. Paul. As development slows and demand stays regular, vacancies are anticipated to peak in most U.S. markets by the top of 2025.
Demand Holds Regular Regardless of Headwinds
Although industrial leasing demand has cooled since its pandemic-era highs, internet absorption stays optimistic. Over the previous yr, quarterly internet absorption has averaged 45 million sq. toes, down from a peak of 151 million sq. toes per quarter in 2021.
Dallas-Fort Value led all markets with 24.8 million sq. toes of internet absorption over the previous yr, adopted by Chicago (19.1M SF), Houston (16.7M SF), Phoenix (15M SF) and Atlanta (8.3M SF). In Q1 2025 alone, internet absorption grew year-over-year in 11 of the highest 25 markets, with Higher Los Angeles seeing the biggest turnaround.
Whereas financial uncertainty and commerce coverage could quickly dampen leasing exercise, regular demand for build-to-suit and manufacturing area is predicted to assist continued absorption as speculative development slows.
Hire Development Slows After Two-12 months Surge
After two years of double-digit lease will increase, industrial lease progress has slowed. Nationwide, common warehouse/distribution rents rose 5.8% to $10.65 per sq. foot over the previous yr. The highest 25 markets noticed extra modest progress of 0.7%, reaching $9.56 per sq. foot.
A number of markets, together with Columbus, Charlotte, Chicago, and West-Central Florida, continued to put up double-digit lease progress in Q1 2025. In the meantime, seven main markets — together with Higher Los Angeles — noticed rents contract, with LA’s common falling 14% year-over-year.
Regardless of the latest slowdown, rents are anticipated to stay optimistic by way of 2025, although at charges beneath the distinctive positive factors seen in 2022 and 2023.
Outlook: Stabilization Earlier than the Subsequent Development Cycle
The economic actual property sector is recalibrating. As new development slows and emptiness peaks, stability is returning to the market. As soon as financial situations stabilize and commerce coverage uncertainties ease, specialists predict a resurgence of demand might drive the following part of progress. Within the meantime, most of the nation’s largest industrial hubs — notably within the Midwest and South — stay well-positioned because of steadier fundamentals and fewer speculative oversupply.
