Despite persistent economic pressures, including high tariff rates and a cooling labor market, the U.S. industrial real estate market demonstrated significant resilience in the third quarter of 2025, according to a new report from Cushman & Wakefield.
The market saw a major rebound in tenant activity, with net absorption surging to 45.1 million square feet (msf) in Q3—the highest quarterly total since mid-2024. This pushed year-to-date absorption to 108 msf, nearly keeping pace with the previous year and underscoring continued strong demand.
Vacancy stabilizes amid flight to modern facilities
For the first time since mid-2022, the national vacancy rate did not rise quarter-over-quarter, holding steady at 7.1%. This stabilization was primarily fueled by the lowest level of new construction deliveries since early 2018 and a slowdown in corporate dispositions.
A key trend highlighted in the report is the strong preference for newer facilities. “We continue to see modern facilities outshine older product. Nearly 69 million square feet of space in buildings delivered since 2020 was absorbed during the third quarter, while facilities built before 2010 actually gave back about 17 million square feet,” Jason Price, senior director and Americas Head of Logistics & Industrial Research, said.
Several major markets that had experienced pressure earlier in the year, including Atlanta, Central New Jersey, and San Diego, posted significant occupancy gains in Q3, helping to reverse prior losses. Nationwide, 16 markets recorded more than 2 msf of positive absorption, a sharp increase from only six markets in the previous quarter.
Development cools and build-to-suit rises
Development activity has noticeably cooled, putting the U.S. industrial market on track for its lowest annual total of new deliveries since 2017. Q3 completions totaled 63.6 msf, a significant drop of 32.5% year-over-year. The South region remained the leader in new development, accounting for 44% of all deliveries.
In a sign of ongoing demand from large corporate logistics users, build-to-suit (BTS) projects are on the rise. Year-to-date, 31% of all completions were BTS, up from 22% in 2024. This trend is expected to accelerate, as 39% of the current pipeline under construction is for customized, efficient facilities.
Meanwhile, industrial rental rates held steady, with the national average asking rent flat quarter-over-quarter at $10.10 per square foot. Annual growth slowed to 1.7%, the slowest pace since early 2020. Regionally, the South (+4.9%) and Midwest (+2.5%) saw modest growth, while the West and Northeast regions saw rental rate declines.
“Even in the face of broader economic challenges, the industrial sector continues to demonstrate its underlying strength,” Jason Tolliver, president, Logistics & Industrial, said. “The demand for modern, customized facilities is holding firm, and vacancy stabilization in Q3 suggests the market is beginning to regain balance after a period of supply-driven pressure.”
