REAL ESTATE NEWS

The U.S. industrial real estate sector is entering a transformative year, shaped by shifting policy and evolving development priorities. After years of elevated supply and slower absorption, vacancies are beginning to plateau, making site selection an increasingly critical factor for new construction.

According to a CommercialCafe analysis, the national industrial vacancy rate stood at 9.2% at the start of 2026, more than double the 2022 rate and 120 basis points higher than in January 2025. While vacancies remain elevated in most major markets, they have shown signs of leveling off in recent months. CommercialCafe analysts project this plateau will continue through the first half of 2026, with tightening expected in the latter half of the year. As vacancies decline and interest rates decrease, investment activity may pick up, driving renewed enthusiasm for new developments, the report said.

Currently, 357.4 million square feet of industrial space is under construction nationwide. Last year's deliveries barely surpassed 300 million square feet, marking the slowest year for construction since 2017. Construction starts are expected to remain muted in 2026, with 2025 groundbreakings totaling just 265 million square feet. However, the locations of new developments may increasingly prioritize access to power over traditional factors such as population centers and transportation networks, particularly as demand for data centers continues to rise.

In-place industrial rents averaged $8.87 per square foot nationwide at the end of 2025, up $0.11 from the prior month and rising 5.4% year-over-year. Atlanta led major U.S. markets with the strongest rent growth at 8.8%, driven by population growth, robust infrastructure and proximity to logistics hubs including a global airport, multiple interstates, railways and the expanding Port of Savannah. Other markets with notable annual rent increases included Miami (8.4%), Tampa (6.7%), Philadelphia (6.7%), and Seattle (6.5%). Midwestern markets lagged, with St. Louis (2.5%), Kansas City (2.6%), and Detroit (2.7%) reporting the slowest growth.

Industrial transactions hit their strongest levels since 2022, with a total volume of $76.3 billion, nearly matching 2024's $76.2 billion. While slightly less space changed hands, the average sale price per square foot increased 10% to $135.

Tariff uncertainty will remain a factor as the industry awaits the U.S.-Mexico-Canada Agreement (USMCA) review this summer, though its impact is expected to be smaller in 2026, CommercialCafe said.

Source: GlobeSt/ALM