Key Takeaways:
- 2025 industrial sales are on a similar pace with 2024’s $74.3 billion, up 14.7% from 2023, but down from the all-time high of $129.8 billion recorded in 2021.
- In-place rents averaged $8.63 per square foot nationally in July, up three cents from June and increasing by 6.1% year-over-year.
- The national industrial vacancy rate in July 2025 stood at 9.1%, up 10 bps from last month and 270 bps annually.
- There was 340.2 million square feet of industrial space under construction nationally in July, while completions so far this year total 170.5 million square feet.
- Los Angeles had the second-largest drop in vacancy rate nationwide, down 150 bps annually.
- Cincinnati, Kansas City and Columbus recorded negative lease spreads with leases from the last 12 months being cheaper than in-place leases.
- Dallas-Fort Worth took the lead in year-to-date industrial transactions at $2.3 billion, with Houston transactions also cracking $1 billion.
- Markets in the Northeastern U.S. recorded some of the widest lease spreads nationwide in conjunction with shrinking pipelines.
Industrial was the darling asset class of commercial real estate coming out of the pandemic. Investor appetite for the sector led to elevated construction, as well as record-breaking sales volumes. However, things have started slowing down around the second half of 2022 and seem to be leveling off despite headwinds, our latest U.S. industrial market report shows.
Trends & Industry News
Industrial Construction Pivoting to New Categories Amid Challenges
The highest industrial sales volume was recorded in 2021 at $129.8 billion. This figure then fell to $105.4 billion in 2022, before plummeting to $64.8 billion in 2023. Then, last year brought a slight recovery of 14.7% to bring 2024’s total industrial transactions to $74.3 billion. Now, this year is currently on pace with 2024, indicating that the boom-bust cycle may be leveling off.
Price appreciation has also cooled in recent years after a period of accelerated growth: The average sale price of an industrial property spiked by 54% between 2019 and 2022 to go from $79 per square foot to $122 per square foot. Capital was cheap, and investors wanted to profit from record rent growth resulting from historically low industrial vacancy rates on top of supply falling behind.
However, by the end of 2022, all of these conditions began to flip: High inflation readings led to tighter monetary policy, demand for industrial space normalized and a huge wave of speculative properties lessened vacancy pressures. Consequently, industrial transactions completed so far in 2025 have an attached average sale price of $129 per square foot — only 6% higher than the 2022 average.
“We’ve watched the industrial investment market move from darling to resilient over the past few years, but we anticipate activity and interest to ramp up with the expectation of economic clarity coupled with growing demand for space.”
Peter Kolaczynski, Director, Yardi Research
On a more positive note, the presence of any price increases at all in recent years stands as a testament to the sector’s resilience. To that end, this year, investors have been pressured by uncertainty in treasury yields, in addition to the overall economy.
Yet, our data shows $31.4 billion in industrial sales so far this year, which is on par with the $31.2 billion traded in the same period of 2024 and the $32.5 billion in 2023. However, not even a durable sector such as industrial is immune to the dampening effects of uncertainty on deal-making, pricing and capital allocation. Current economic uncertainties may also lead to a widening of the bid/ask gap, as buyers expect discounts on properties to account for risks, whereas sellers are content to wait and hold onto high-value assets, hoping for higher valuations.
Despite these pressures, our industrial real estate outlook anticipates activity to pick up in the coming quarters due to brightening investor sentiment and enduring demand for industrial space. Most analysts also expect rate cuts later in the year. Clearer tariff policy in conjunction with some aspects of the July tax law should also have a positive effect on investment.
Rents & Occupancy
Philadelphia Shows Solid Rent Growth
In-place rents for industrial space averaged $8.63 per square foot nationally in July, up three cents from the previous month and increasing by 6.1% annually.
Philadelphia led the nation in in-place rents, growing by 9.2% year-over-year (Y-o-Y). With stable fundamentals; a growing shipping port with 8% compounded annual growth in the last decade; and a high concentration of logistics firms, the Philadelphia industrial market enjoys positive conditions for growth. At the same time, industrial stock in Philadelphia is some of the oldest in the country, whereas industrial tenants increasingly look for modern amenities. This has led to a high absorption rate of the 68.5 million square feet of space delivered here since 2020, which has also boosted the market’s inventory by a sizable 14.4%. Currently, there’s 5.2 million square feet of new stock in the Philadelphia pipeline, possibly leading to further upward pressure on rent growth.
The national vacancy rate in July 2025 stood at 9.1%, increasing 10 basis points (bps) month-over-month and 270 bps Y-o-Y. Notably, record supply in recent years has pushed the vacancy rate up across most markets in the country, but a vacancy plateau may be underway in the coming months as the supply boom continues to fade.
At a national level, the spread between a lease signed in the last 12 months and the overall in-place average rent stood at $1.45 per square foot. In fact, new lease premiums have been consistently shrinking in the last year as occupancies have been dropping and the market has shifted in favor of tenants. Nevertheless, some markets continue to experience high industrial rent growth with Bridgeport, Conn. industrial properties leading the way with a $5-per-square-foot premium for new leases.
Supply
Advanced Manufacturing Development Grows in Bay Area
In July, 340.2 million square feet of industrial space was being built nationwide, resulting in a projected expansion of 1.7%. Year-to-date completions total 170.5 million square feet, our U.S. industrial market report shows.
Like most other markets nationally, the Bay Area’s industrial inventory received a significant boost in stock in recent years. Specifically, the market added 24.4 million square feet of space between 2020 and 2024 — but only one-tenth of that space was comprised of manufacturing. For comparison, today, more than one-third of industrial space being built in the Bay Area is manufacturing space with most of that being in advanced manufacturing.
Demand for advanced manufacturing space has been boosted by the growth of generative AI, chip production and server facilities. Continuing demand in these sectors may lead to another pipeline boom, this time spearheaded by manufacturing. Here, Overton Moore Properties is currently building two manufacturing facilities in Livermore, Calif., in the eastern Bay Area. Additionally, Related Companies recently received approval to replace millions of square feet of office space with industrial in a Santa Clara, Calif., master plan that it’s currently developing.
Transactions
Baltimore Sales Heat Up
According to our industrial real estate market report, transactions involving industrial properties totaled $33.8 billion nationally in the first half of the year. Properties sold so far this year traded for an average of $129 per square foot.
While average sale prices have been relatively stable since 2022, individual markets have seen high degrees of variation. For instance, looking at the 30 major markets nationwide, Baltimore has experienced the fastest average price growth in recent years, reaching $193 per square foot for year-to-date transactions in 2025. That figure is 70% higher than the average for 2022 sales in the market.
Notably, prices in the market only grew by 29% between 2019 and 2022, leaving room to grow in subsequent years. Moreover, most of the average price gains have resulted from two substantial sales: KKR’s $115-million purchase of two buildings near the Baltimore/Washington International Airport averaged $253 per square foot, while MRP Industrial bought a logistics park for an average of $284 per square foot. These sales also pushed the market’s year-to-date sales above last year’s total sales volume of $565 million.
Western Markets
Los Angeles Vacancies Contract 150 bps Y-o-Y
Year-to-date industrial transactions in Phoenix surged to $1.66 billion in July, up considerably from last month’s $1.13 billion and representing a 26% increase compared to the same period last year. This momentum signals growing investor confidence in Phoenix industrial acquisitions and positions the market as the region’s sales leader, even as construction hits the brakes. Los Angeles followed with $1.38 billion in transactions, while California’s Orange County ($883 million) and Central Valley ($767 million) rounded out the top regional performers. Western markets also continued their dominance in average sale pricing with Orange County, Los Angeles, the Inland Empire and Seattle commanding some of the highest rates nationally, despite staying mostly flat year-over-year.
Western market vacancies trended predominantly below the national average of 9.1% in July. In this case, industrial space in Los Angeles emerged as a standout performer with a vacancy rate of 8.1%, which, while middling in absolute terms, represents a rare decrease of 150 bps compared to last year and marks the second-largest vacancy contraction nationwide. Meanwhile, the Inland Empire; Orange County; and Portland, Ore., also maintained sub-8% vacancy rates, while industrial space in Seattle recorded a 8.5% vacancy after a 130-bps climb. Similarly, the Bay Area’s vacancy rate reached 8.1% — up 210 bps from July 2024. Only Denver (11.9%) and the Central Valley (10.5%) recorded vacancies above the national benchmark.
At the same time, regional construction pipelines contracted across most Western markets with only two exceptions — Denver’s marginal 3% Y-o-Y increase, as well as Orange County, which saw a 74% pipeline expansion primarily due to a minimal, 780,000-square-foot pipeline in July 2024. Likewise, pipelines in Portland, Ore.; Phoenix; and the Central Valley in California continued their declines after falling 50% or more annually, whereas those in the Inland Empire, the Bay Area and Los Angeles experienced more moderate contractions.
The Central Valley was still the most affordable Western market in July, with average rents at $6.64 per square foot, climbing 6% annually. Conversely, Orange County ($16.91), Los Angeles ($15.32) and the Bay Area ($13.78) not only dominated regional pricing, but also claimed the nation’s three highest industrial rent rates. Still, there are signs of easing rental pressure. The Bay Area saw rents go up by a modest 2% Y-o-Y, while new leases signed in the last 12 months in Los Angeles were on par with in-place leases. Otherwise, the highest new lease premiums in the region were in the Inland Empire ($2.49 extra per square foot) and Seattle ($2.42 extra per square foot).
Midwestern Markets
3 Midwestern Markets Record Negative Lease Spreads
In July, Chicago was home to the largest industrial pipeline in the Midwest at 9.8 million square feet, representing a projected market expansion of 0.9%. While this figure marks an 8% decrease compared to the U.S. industrial markets report from 12 months prior, it also indicates a recovery after the dip earlier in the year. Meanwhile, industrial stock underway in Indianapolis nearly tripled year-over-year, surging from 1.83 million square feet in July 2024 to 5.27 million one year later. And, not to be outdone, Detroit’s pipeline reached just under 8 million square feet (up 7% annually), while Columbus’ pipeline declined to 6.1 million square feet.
Leasing indicators continue to point toward tenant-favored conditions in several Midwestern locales. As a matter of fact, all regional markets recorded lease spreads below the national average with Minneapolis-St. Paul maintaining the widest spread at $1.38 per square foot, followed by Detroit’s $0.96 and the $0.82 for industrial space in Indianapolis. It’s worth mentioning that Cincinnati, Kansas City and Columbus were among only five markets nationwide that recorded negative lease spreads, meaning leases signed in the last 12 months averaged cheaper rates compared to average in-place rents as of July 2025. At the opposite end of the spectrum, Minneapolis-St. Paul boasted the highest average in-place rents at $7.36, followed by Detroit ($7.22) and Chicago ($6.53), although these averages still sit well below the national benchmark of $8.63 per square foot.
Vacancy rates remained polarized in the Midwest in July. More precisely, vacant industrial space in Indianapolis reached 10.8% of the market after a 450-bps Y-o-Y increase — one of the most substantial vacancy spikes nationwide. The, the Twin Cities and St. Louis recorded vacancies near the national average at 7.9% and 7.7%, respectively, although these figures are also up 230 and 260 bps annually. In contrast, vacancies for Kansas City industrial space dropped another 30 basis points month-over-month to reach 4.3% and secure the second-lowest rate nationwide.
Year-to-date sales in Chicago totaled $1.62 billion at the end of July, establishing the market as the nation’s fourth-most active for industrial transactions. However, Chicago also recorded the 10th-lowest average sale price per square foot nationally at just $95, trailing fellow Midwestern markets including Columbus ($104) and the Twin Cities ($105). All regional average sale prices remained well below the national average of $129 per square foot, with the nation’s most affordable markets being Cleveland ($55), Kansas City ($57) and Cincinnati ($66).
Southern Markets
DFW Transactions Exceed $2B as Construction Also Picks Up
Average in-place rent rates remained affordable across the South in July. In this region, Miami was the only market with rates above the national average as rents here rested at $12.85 per square foot, which was flat month-over-month but up 10% Y-o-Y. Baltimore had the region’s next-highest rental rate at $8.61, followed by Tampa’s $8.37 and Charlotte’s $7.35. The Memphis industrial market maintained its position as both the region’s and nation’s most affordable market at $4.27 per square foot (up 6% annually). Markets including Miami, Nashville and Atlanta recorded significant new lease premiums of $2.30 to $3.50 per square foot, whereas new leases for industrial space in Charlotte were flat compared to in-place rents and those in Memphis were actually lower.
Houston industrial properties boasted the region’s lowest vacancy rate at 6.9%, which is down considerably from the 9.3% it logged one year prior. Atlanta followed with 8%, while Nashville and Baltimore each recorded rates of 8.8%, although those figures represent increases from year-ago levels. Back in Texas, vacancies in Dallas-Fort Worth remained elevated at 10.2% — up 310 bps on the year but trending down 70 bps month-over-month.
An influx of more than $600 million into the Dallas-Fort Worth market last month brought its year-to-date total to more than $2.3 billion, nearly matching sales volumes from the same period in 2024. This surge also displaced New Jersey as the nation’s leading investment destination in the process, granting the Metroplex the title for the first time since March. Houston became the second Southern market to exceed $1b in sales so far this year, while Atlanta ($715 million), Charlotte ($674 million) and Nashville ($650 million) followed in the regional rankings. Sale prices continued their upward trajectory in Baltimore, reaching $193 per square foot in July — up from $179 in June and $129 one year ago — to maintain the market’s position as the South’s priciest for industrial acquisitions.
The 12.4 million square feet of industrial space currently underway in Memphis is slated to expand the market’s inventory by approximately 4.1% — marking the largest projected expansion out of all of the markets in our U.S. industrial market report. Dallas-Fort Worth and Houston are also primed for significant inventory expansions at 3% and 2.5%, respectively. In absolute terms, DFW still houses the largest industrial pipeline nationwide at 30.6 million square feet, ticking up slightly month-over-month and surging 88% annually. Paired with its active transaction landscape, this pipeline positions the Metroplex’ industrial market as one of the best-poised for growth nationally, even considering its persistently elevated vacancy rate.
Northeastern Markets
Sluggish Industrial Expansion Drives Rent Premiums
While New Jersey was surpassed by Dallas-Fort Worth in terms of year-to-date sales, the Northeast is still experiencing a surge in investor interest, our industrial real estate outlook shows. Namely, sales in New Jersey reached $1.84 billion in July, which is up 57% compared to year-to-date sales in July 2024. Additionally, year-to-date sales in Boston and Philadelphia approximately doubled compared to 2024, reaching $661 million and $536 million, respectively. In terms of price per square foot, New Jersey leads regionally with $245 — fourth nationally — followed by Boston’s $159. The region’s other Northeastern markets recorded average sale prices below the national average.
Otherwise, industrial construction in the Northeast remained muted across the region. Pipelines dropped in all markets except Bridgeport, with New Jersey maintaining the largest pipeline by square footage at 5.7 million square feet. Expansion was also low on a percentage-of-stock basis with projected market growth from developments currently underway ranging from 0.4% in Boston to 1.1% in Philadelphia.
Average in-place rents for industrial space in Boston stood at $11.56 per square foot in July, ticking up 18 cents month-over-month and climbing 8% Y-o-Y. Even so, the regional top spot is still held by New Jersey, where average rents rested at $11.99 per square foot, up 13 cents from June 2025 and growing by $1.13 since July 2024. New lease spreads in Bridgeport remained elevated, with leases signed in the last 12 months commanding a $5-per-square-foot premium compared to in-place leases. Finally, the region’s other markets recorded comparatively high new lease premiums ranging from $2.62 in Philadelphia to $3.51 in Boston. A lengthened period of low supply combined with increased demand in coastal markets on the Eastern Seaboard may be driving tighter leasing conditions, particularly for high-tier properties.
Economic Indicators
E-commerce Sales Recover but Fail to Match 2010s Boom
E-commerce sales grew by 1.4% quarter-over-quarter and are up 5.3% Y-o-Y in Q2 2025, according to data from the U.S. Census Bureau. That represents a rebound in sales after a minor decline of 0.1% in Q1, which was nonetheless one of only two instances on record in which e-commerce sales volume fell.
Notably, the share of e-commerce out of core retail sales was up by 10 bps in Q2 and now sits at 19.1%. Even so, this figure is still 10 bps lower than it was in Q4 2024, which was an all-time high (aside from the COVID-19 spike in Q2 2020).
After the initial pandemic boost to e-commerce sales — which led to a massive, 32.6% spike in Q2 2020 — growth has been more subdued this decade compared to the 2010s. Since the initial shock, e-commerce sales have grown by 7.5% per year, as compared to 14.1% annually in the years preceding the pandemic. In fact, e-commerce sales are currently where they would be if there was no spike in 2020 and the pre-pandemic rate of growth had carried over into the 2020s.
Methodology
The monthly CommercialCafe national industrial real estate report considers data recorded throughout the course of 12 months and tracks top U.S. industrial markets with a focus on average rents; vacancies (including subleases, but excluding owner-occupied properties); deals closed; pipeline yield; forecasts; and the economic indicators most relevant to the performance of the industrial sector. Listing rate and occupancy information was based on Yardi Research data.
- Average Rents: Provided by Yardi Market Expert, a cutting-edge service that uses anonymized and aggregated data from other Yardi platforms to provide the most accurate rental and expense information available.
- Vacancy: The total square feet vacant in a market, including subleases, divided by the total square feet of industrial space in that market. Owner-occupied buildings are not included in vacancy calculations.
Stages of the supply pipeline:
- Planned: Buildings that are currently in the process of acquiring zoning approval and permits, but have not yet begun construction.
- Under Construction: Buildings for which construction and excavation has begun.
Sales volume and price-per-square-foot calculations for portfolio transactions or those with unpublished dollar values are estimated using sales comps based on similar sales in the market and submarket, use type, location and asset ratings, sale date and property size.
Year-to-date metrics and data include the time period between January 1 of the current year through the month prior to publishing the report.
Market boundaries in the CommercialCafe industrial report coincide with those defined by the CommercialCafe Markets Map and may differ from regional boundaries defined by other sources.
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