Midyear 2025 Industrial Real Estate Outlook: Navigating the Crosscurrents

As we reach the midpoint of 2025, the industrial real estate market finds itself at a turning point—one defined by persistent uncertainty, cautious optimism, and opportunities for strategic positioning.

Demand Holds Ground, But Headwinds Build

After a historic run during the pandemic era, demand has moderated. Net absorption is forecasted to remain positive—around 75 million square feet this year—but marks the lowest level since the Global Financial Crisis. This slowdown reflects a broader economic recalibration driven by tighter monetary policy, ongoing trade tensions, and a deceleration in global goods movement.

Yet it's not all caution signs. E-commerce, which took a breather after years of hypergrowth, is expected to reaccelerate. Its share of core retail sales is on track to rise from 29.9% in 2024 to over 30.6% by 2027. As consumer behaviors shift and rebalance, this growth will likely reassert pressure on logistics networks and warehousing demand.

Vacancy Peaking, Supply Pipeline Shrinking

One silver lining: the construction pipeline has thinned considerably. With speculative development slowing, vacancy is expected to peak near 8% in early 2026 before declining again. For occupiers, this creates a brief window to secure space with more favorable terms—particularly in markets with excess new inventory. For investors, it signals a near-term flattening followed by a potential rent growth rebound as supply and demand realign.

Industrial Real Estate Impacts from Trade War, Occupiers and Manufacturers.

Trade Tensions Create Leasing Caution

In a survey conducted by Cushman & Wakefield across 54 U.S. markets, over 60% reported occupiers pausing leasing activity for 3–12 months in response to tariff volatility. Despite this, most manufacturing construction activity remains intact, with 67% of markets reporting no delays. Free trade zones and bonded warehouse strategies are gaining traction as logistics players look to hedge geopolitical risk while maintaining flexibility.

Rent Growth Eases—but Income Growth Persists

While YOY asking rent growth has plateaued—and even turned negative in 40% of tracked markets—effective rent growth is not the whole story. Thanks to lease structures and long average terms (national WALT ~7 years), income growth across portfolios is still expected to track in the mid-to-high single digits annually. This nuance continues to support investor interest in the industrial sector, even during periods of softer leasing momentum.

Looking Ahead: A Market for Strategists

With policy-driven volatility unlikely to disappear soon, 2025 is a year of recalibration. Occupiers have a rare moment to capitalize on softer fundamentals, while investors should look beyond near-term metrics and assess long-term income durability. As always, location, asset quality, and timing will separate the good from the great.

The window for opportunity is open—but it won’t be for long.

🔗 Read the full Cushman & Wakefield report here: https://www.cushmanwakefield.com/en/united-states/insights/2025-midyear-outlook