December 2025 Industrial Report: Lingering Supply Surge & Policy Shifts Drive Transitional Year in Sector

Key Takeaways:

• Manufacturing continued its upward trajectory in 2025, while data centers received unprecedented investment and formerly niche assets such as outdoor storage also entered the limelight.
• National in-place rents averaged $8.76 per square foot, increasing by 5.7% annually. 
• The national vacancy rate for industrial space stood at 9.7% at the end of last month, up 220 basis points year-over-year. 
• At the end of November, 382.7 million square feet of industrial space was underway nationwide. Year-to-date completions total 265.7 million square feet, while construction starts so far in 2025 add up to 258 million square feet. 
• Year-to-date industrial sales totaled $68.4 billion at the end of last month in what’s slated to be the strongest year for sales since 2022. 
• Western markets: Sale prices across several Southern California markets are stagnating or pulling back, including Los Angeles (-4.3% annually), the Inland Empire (-13.2%) and the Central Valley (-15.9%). 
• Midwestern markets: Five of the seven most affordable major markets for industrial sales are located in the Midwest, including the lowest-priced market overall in Cleveland. 
• Southern markets: Charlotte, N.C., and Memphis, Tenn., recorded modest rent appreciation in the last 12 months at 4.5% and 4.1% while also seeing widening vacancies in an ongoing trend toward   tenant-favored conditions. 
• Northeastern markets: Several markets in the region posted some of the widest spreads nationwide for leases signed in the last year, including Boston ($3.7 per square foot) and Bridgeport, Conn. ($4.40 per square foot). 

Defined by lingering effects of the 2022-2023 supply surge and rapidly shifting trade policy, 2025 was a year of transition for the industrial real estate market, according to our U.S. industrial market report.

Trends & Industry News

Supply Standstill, Manufacturing Boom Continue Throughout 2025

The keyword for the last year was moderation, as the industry continued to struggle absorbing the results of a historic supply boom. For comparison, the period between 2020 and 2024 saw more than 2.5 billion square feet of industrial space built nationwide. Although a significant amount of deliveries were build-to-suit, pre-leased or otherwise quickly absorbed, the net effect was rising vacancy rates and moderating rent growth across nearly every market. Consequently, our industrial market outlook shows that construction dropped sharply in 2024, making 2025 mostly on par with the previous year in terms of construction.

Notably, tariff-driven volatility also contributed to the challenges of the industrial sector in 2025. In the first months of the year, companies stockpiled goods in anticipation of import tariffs. Liberation Day in April raised concerns, but delays in implementation and subsequent tariff level cuts brought further uncertainty for companies reliant on international trade. Still, this year’s tariff changes represent the most significant shift in tariff policy in nearly a century, leading to further caution in decision-making as companies deferred lease decisions and reevaluated supply chains in hopes of more clarity down the line.

At the same time, manufacturing continued its transformation in 2025, experiencing headwinds as well as opportunities. Specifically, the new tax law enacted this year aims to encourage domestic production of goods. It also eliminated tax credits for production and purchases of electric vehicles and green tech — industries that have driven a significant amount of the manufacturing sector’s explosive growth in recent years. Meanwhile, tariffs on steel and aluminum also raised production costs for companies that rely on these materials, forcing many to rethink supply lines and materials sourcing. Automation, reshoring and nearshoring continue to gain momentum as companies look to shore up supply line vulnerabilities and simultaneously offset rising costs.

“Uncertainty reigned supreme in 2025. Between tariffs and their economic effects, AI and the volume of data centers needed to support it, and fluctuating EV and battery trends, resilience and flexibility became key traits for owners, developers, and occupiers.” 

Peter Kolaczynski, Director, Yardi Research

Some niche subsets of industrial real estate also got their time in the limelight in 2025. Namely, data centers have been making headlines with tech companies dishing out billions of dollars in massive facilities to expand their generative AI capabilities. While there are concerns of a bubble in the sector, enthusiasm has yet to moderate, making it the newest darling subset of industrial. Our industrial property outlook also shows growing investor appetite for outdoor storage, as occupiers increasingly see it as a low-cost option for filling supply chain gaps.

Rents & Occupancy

Houston Market Proves Resilience as Industrial Construction Accelerates

National in-place rents for industrial space rested at $8.76 per square foot at the start of December, increasing by $0.01 month-over-month and 5.7% year-over-year (Y-o-Y).

Atlanta industrial real estate recorded the highest rent growth after increasing by nearly 10% in the last 12 months. As a result, Miami — which has led the largest markets in terms of rent growth for most of the year — now fell to second place, with an annualized rent growth of 8.6%.

Notably, industrial rent growth has stabilized across most markets in recent quarters as demand normalized and new deliveries continued to be absorbed. That said, the Houston market has experienced above-average rent growth of 5.5% in the last year and a vacancy rate of 6.2%. While these numbers may seem pedestrian at first glance, they’re quite remarkable when considering the level of recent deliveries in the market. Since 2020, the Houston industrial space market saw 137.8 million square feet of industrial deliveries, expanding its stock by 20.3%. Here, a growing population across the entire Texas Triangle and a busy container port drives further demand in the Houston industrial market. In fact, the Port of Houston handles the fifth-most containers in the country, as well as three-quarters of all Gulf Coast traffic. Demonstrating the market’s attractiveness, PepsiCo recently signed a lease for 1.1 million square feet of space in Brookshire, Texas.

Spreads between newly signed leases and in-place leases increased slightly, but still remain well below the historic highs recorded in recent years. More precisely, leases signed in the last 12 months averaged $10.07 per square foot, making them $1.31 pricier compared to national in-place rents. Last November, the spread stood at $2.14 per square foot.

Nationally, the industrial vacancy rate finished at 9.7% at the end of November, increasing by 220 basis points (bps) compared to November 2024.

Supply

Indianapolis Manufacturing Scene Boosts Local Industrial Pipeline

At the start of December, 382.7 million square feet of industrial space was underway nationwide for a projected inventory expansion of 1.9%, per our industrial real estate report highlights. Year-to-date completions total 265.7 million square feet, while construction starts so far in 2025 add up to 258 million square feet.

In particular, Indianapolis’ central location and access to major interstates, railroads and a cargo airport makes it a primary beneficiary of the recent logistics boom. Indeed, the market saw more than 73 million square feet of new space between 2020 and 2023 — a significant market expansion of 19% — much of which was in logistics facilities.

Additionally, the market’s robust warehousing sector and supply chain advantages are increasing its attractiveness for manufacturing activity. For example, Eli Lily is developing two high-tech buildings totaling more than 1.2 million square feet of industrial space in metro Indianapolis, encompassing both manufacturing and research and development operations. The company plans to invest approximately $12.5 billion in the Indianapolis area in the coming years. Similarly, in Fishers, Ind., a TWG Motorsports/Cadillac collaboration is behind a 400,000-square-foot facility being developed to handle Formula One car manufacturing as the luxury car brand prepares for an entry into the F1 series.

Transactions

Phoenix Retains Investor Appetite Despite Record-Breaking Development

Our U.S. industrial market report shows that year -to-date industrial sales totaled $68.4 billion at the end of November to put 2025 on track to become the best year for transactions since 2022. To that end, every quarter of 2025 has surpassed its 2023 counterpart in terms of industrial sales. Granted, oversupply and tariff pressures have put downward pressure on transactions, but long-term demand drivers continue to keep valuations competitive. Falling interest rates have also allowed more leeway for investment activity in the industrial sector.

Phoenix is a prime example of enduring demand for industrial stock, even amid an unprecedented supply boom. Recent construction brought a rapid market expansion of almost 30% since the start of the decade, pushing up vacancies and slowing rent growth. Even so, investment activity for Phoenix industrial properties remains remarkably high, ranking third nationally in sales volume with a total of $3.2 billion year-to-date. Our industrial property market report identified the largest transaction as the Goldman Sachs and Lincoln Property Company building in the Luke Field logistics park in Glendale, Ariz., which was sold to Walmart for $152 million. The transaction further highlights Glendale as a primary destination for corporate tenants. The area hosts major operations from companies including Microsoft, REI and Red Bull.

Western Markets

Southern California Industrial Sale Prices Moderating

At the end of November, lease spreads began to soften throughout the Western U.S., creating additional negotiating leverage for occupiers in select markets. For instance, among the region’s nine major markets, four recorded new lease spreads below the national average of $1.30 per square foot. In particular, leases signed for industrial space in Portland over the last year commanded premiums of $1.20 per square foot compared to in-place rates, while Phoenix registered $1.00 and Orange County just $0.88, signaling a cooling trend in some of the nation’s historically highest-priced markets. The Los Angeles market continued experiencing negative lease spreads at -$0.87 per square foot, reflecting substantial downward pressure on recently negotiated leases.

During the peak of industrial construction in 2022-2023, the Phoenix market delivered tens of millions of square feet of new industrial inventory, predominantly through speculative logistics developments that subsequently struggled with reduced occupancy levels. Since then, construction activity has declined steadily, eventually dropping below 20 million square feet by mid-2025 where it remained at the end of November. Despite this contraction, Phoenix still maintained the region’s most substantial industrial pipeline and the nation’s third-largest. Denver and Atlanta followed, each with just over 8 million square feet of space under construction. At the opposite end of the spectrum, California’s Orange County registered the smallest pipeline among the region’s major markets at just 1.1 million square feet, although this figure still represented a nearly 25% increase compared to December 2024.

Industrial vacancy rates remained elevated throughout several Western U.S. locations at the end of November, affecting both coastal logistics hubs and inland distribution centers. As such, several markets recorded substantial increases in average vacancy rates, including California’s Central Valley (11.6%, up 570 bps Y-o-Y), Orange County (8.5%, up 420 bps), Portland (8.5%, up 350 bps) and Denver (12.9%, up 330 bps). Otherwise, the Inland Empire maintained the region’s lowest vacancy rate at 8.4%, marking a more moderate 110-bps increase from November 2024. Not far behind, Los Angeles industrial space vacancies rested at 8.5% following a 100-bps annual decrease, establishing it as one of just four major markets nationwide posting lower vacancies compared to a year ago.

Industrial property transactions in 2025 brought declining sale prices to the Western U.S. In this respect, Orange County remained the region’s most expensive market for acquisitions at $305 per square foot, although this figure retreated 3.2% from last year. Average sale prices also decreased relative to year-ago levels in other Southern California markets, including Los Angeles (-4.3%), the Inland Empire (-13.2%) and the Central Valley (-15.9%). Conversely, prices in Phoenix appreciated modestly by 6.3%, averaging $169 per square foot in year-to-date transactions.

Midwestern Markets

Midwest Home to 5 of 7 Lowest-Priced Markets for Industrial Acquisitions in 2025

In the Midwest, several markets distinguished themselves by being among the only entries nationwide with stabilizing or even declining vacancy figures, as evidenced in our U.S. industrial market report. Kansas City retained its position as the nation’s tightest major industrial market, with vacancy rates stabilizing around 5% for several consecutive months. Across the state, St. Louis followed a similar trajectory, with average vacancy rates resting at 6.5% — down 110 bps annually for the largest vacancy contraction in our study. Detroit industrial properties also recorded vacancy rates hovering around 6.5% to position the market among the five tightest nationwide.

Midwestern markets remained the nation’s most accessible destinations for industrial investment. As a matter of fact, all regional entries were below the national average in terms of sale prices, with the notable exception of Detroit, where average figures were elevated by the high-profile sale of General Motors’ battery manufacturing facility in Lansing, Mich. Further south, Cleveland emerged as the most affordable major market nationwide for transactions completed year-to-date by averaging $56 per square foot, while four additional Midwestern markets — Cincinnati, Kansas City, Chicago and Indianapolis — claimed the nation’s third-, fifth-, sixth- and seventh-most affordable positions, respectively.

Regional entries also positioned themselves below the national average in terms of in-place rents. Minneapolis-St. Paul commanded the region’s highest average rents at $7.51 per square foot after climbing 4.9% Y-o-Y, followed by Detroit’s $7.16, up 3% annually. The region’s remaining industrial markets recorded industrial rent growth spanning from 3.5% in Kansas City to a more robust 6.4% in Columbus, though new lease spreads remained compressed or even negative across most locations.

Of course, the region’s affordability is likely catalyzing the industrial development rebound that’s currently unfolding throughout the Midwest: Five of the eight Midwestern markets in our study now maintain larger construction pipelines compared to a year ago. Specifically, Chicago commanded the region’s largest industrial pipeline at 13.7 million square feet, nearly doubling the volume under construction in late 2024. Not far behind, industrial construction in Columbus is nearly tied with 12.9 million square feet after surging 59% Y-o-Y. And, Indianapolis and Cincinnati doubled their respective pipelines year-over-year, driven primarily by logistics developments that underscore the enduring significance of these markets in regional supply chain networks.

Southern Markets

Charlotte & Memphis Contend With High Vacancies & Sluggish Rent Growth

After recording an additional $300 million in industrial sales during November, total year-to-date transactions in Dallas-Fort Worth reached $5.6 billion — more than $1 billion ahead of the runner-up market and 50% higher than 2024 totals. Average prices in the Metroplex settled at $103 per square foot, which was slightly below the $113 per square foot for last year’s transactions. Next, industrial space in Charlotte, N.C., distinguished itself with the most dramatic sales surge compared to this period last year, as its $1.8 billion in industrial transactions year-to-date outpaced 2024 figures by approximately 170%. Average prices for industrial space in Charlotte also climbed substantially, reaching $113 per square foot compared to just $78 per square foot last year.

Some Southern markets continue attracting outsized attention from occupiers, driving steadily accelerating in-place rents. In particular, Atlanta positioned itself at the forefront of this trend: Its current in-place rate of $6.66 per square foot remains relatively affordable, yet represents an annualized increase of nearly 10% — the highest in our study. Miami was also on the national podium for rent growth at 8.6%, underscoring the region’s elevated desirability. Conversely, Charlotte and Memphis registered the South’s most modest rent appreciation at 4.5% and 4.1%, respectively, per our U.S. industrial market report.

It’s no coincidence that markets experiencing the slowest rent growth and narrowest new lease spreads in the South — Charlotte, N.C. and Memphis, Tenn. — also faced some the nation’s most rapidly widening vacancies. Industrial occupancy in the Charlotte metropolitan area declined by 640 bps compared to November 2024, while Memphis industrial properties experienced a 600-bps contraction, indicating that both markets require additional time to achieve vacancy-rent equilibrium. Nevertheless, select Southern markets appeared to have already crested the vacancy surge. Namely, Houston’s vacancy rate settled at 6.2% (down 70 bps annually), while Nashville’s rate rested at 7.4% — up 250 bps Y-o-Y, but stabilizing in recent months.

Texas markets maintained their position as the nation’s most active in terms of industrial development. A renewed wave of demand for logistics space throughout the Texas Triangle propelled the Dallas-Fort Worth industrial pipeline to 31.5 million square feet, while construction volume in Houston reached 21.9 million square feet. Memphis and Atlanta also ranked among the seven markets nationwide with pipelines exceeding 10 million square feet.

Northeastern Markets

New Lease Spread Pressure Continues Across Northeast

Industrial construction in the Northeast remained muted by the end of November. Philadelphia’s industrial pipeline now totals 4.7 million square feet of space, climbing slightly month-over-month but still well below year-ago totals. Elsewhere, industrial pipelines were essentially unchanged, dipping by 2.4% in New Jersey and increasing by a marginal 0.8% in Boston. No new industrial developments larger than 25,000 square feet broke ground in November in Bridgeport, Conn., keeping the market’s pipeline at 1.6 million square feet.

Yet, boosted by sluggish construction, the Bridgeport market retained one of the lowest vacancy rates nationwide at 5.5%,180 bps higher compared to November 2024. Similarly, Philadelphia’s vacancy rate rested at 8.9% after a 230-bps increase. And, vacancies for industrial space in Boston and New Jersey were almost tied around 11%, situated above the national average of 9.7%.

New lease premiums also remained high region-wide at the end of November. Leases signed in the last year in Boston were $3.70 per square foot more expensive compared to in-place leases. Likewise, spreads in Bridgeport remained the most elevated among major industrial markets nationwide — a distinction they held for most of the year — at $4.40 per square foot.

Otherwise, average sale prices for industrial stock in the Northeast were mixed. Sales in the Boston market are up 105% compared to last year, making it the only Northeastern market with sales growth that outpaces the national trend of 39%. Transactions also grew year-over-year in the remaining three major markets in the region, albeit by a more moderate 23% to 35%.

Economic Indicators

Warehouse Employment Continues to Shed Jobs

Employment in the warehouse and storage sector continued to slip, extending losses that began to mount last summer. According to the Bureau of Labor Statistics, the sector employed slightly more than 1.8 million workers in November, which is down 1.5% from November 2024.

Of course, employment in the sector accelerated rapidly at the start of the decade as e-commerce retailers sought to account for rising e-commerce demand. Peaking in March 2022, warehousing and storage employment shed more than 120,000 workers in the subsequent year and a half. Now, after minor rebounds in the summer of 2023 and 2024 were erased, the number of workers employed in the industry is at a four-year low.

Although the outlook for e-commerce and logistics remains strong, the 2022 record may be in place for a while. Automation and robotics play a growing role in warehousing, improving operations even as employment stagnates.

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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