Key Takeaways:
- The national industrial vacancy rate declined slightly to 8.5% in May, down 30 basis points from April, but still up 290 basis points over the past 12 months
- Industrial construction starts totaled 86.9 million square feet through May, putting 2025 on pace to record the lowest volume of new starts since 2018
- Port of Los Angeles handled 25% less cargo than forecast in May, as the impact of new tariffs and trade uncertainty disrupted expected shipping volumes
- Bridgeport recorded the widest lease spread in the country at $4.01 per square foot and the lowest vacancy rate at 5.5%
- Phoenix recorded $862 million in industrial sales through May, ranking sixth nationwide despite being only the tenth-largest market by square footage
- Dallas–Fort Worth remained the top U.S. market for industrial construction, with 28.1 million square feet underway in May, equal to 2.8% of total stock
Trends & Industry News
Trade Policy Turbulence
Tariff uncertainty continues to ripple through supply chains, and the many changes to policy in
recent months have left firms contemplating how to navigate uncharted waters.
Import volume fell by nearly 20% in April as firms pulled back following a first-quarter rush to ramp
up inventories before the Trump Administration announced new tariffs. However, the full impact
of these tariffs has yet to be reflected in the data, as volumes still rose 2.2% year-over-year.
Meanwhile, effects of uncertainty and tariff whiplash are emerging at the ports. Officials at the
Port of Los Angeles reported handling 25% less cargo than expected in May, and job postings at
the port were down by half. Because shipments from China typically take about six weeks to arrive,
the May dip reflects the impact of the 135% tariff placed on Chinese imports that went into effect
in April and was given a three-month reprieve in mid-May. Now, reports suggest another wave of
imports is underway, as firms rush to get ahead of future tariffs and build up inventories ahead of
the holiday season. Summer is traditionally the peak period for holiday-related imports, and this
year could see even higher volumes than usual as businesses brace for renewed uncertainty once
the 90-day pause expires.
“The uncertainty of the tariff policy may be a heavier burden on decision makers than the weight of the tariffs established thus far.”
Peter Kolaczynski, Director, CommercialEdge
In the short run, we expect increased interest in bonded warehouses—facilities where imported
goods are stored without paying taxes until they are released—as firms seek strategies to navigate
ongoing uncertainty. Reuters has reported increased interest from companies and logistics
providers to convert existing warehouse space into bonded warehouses. While the conversion
process can be costly, time-consuming and paperwork-heavy, many firms view it as a worthwhile
investment. If tariff rates ease in the future, goods can be released at a lower rate than is in place
currently. Conversely, if tariffs remain elevated and uncertainty persists, bonded warehouses offer
a way to gradually release inventory and better manage tariff-related cost pressures.
In the long run, firms may look to move production of goods that are bound for America out
of China and into lower-tariff nations like Vietnam, India and Mexico. Some may choose to
reshore production in the U.S., but a 50% tariff on steel and aluminum imports could hamstring
manufacturer plans to develop facilities stateside.
Rents and Occupancy
Miami Demand Fuels Rent Growth
National in-place rents for industrial space averaged $8.54 per square foot in May, up five cents in the month and 6.3% over the past 12 months.
Miami led the nation in rent growth in May, with in-place rents increasing 9.8% over the past 12 months. Although the Port of Miami doesn’t rank among the top 10 U.S. ports by container volume, it plays a vital role in trade with Latin America and the Caribbean. When combined with the city’s international airport, Florida’s growing population and limited space for new development, we expect strong industrial demand to fuel continued rent growth in Miami.
Average Rent by Metro
The national industrial vacancy rate was 8.5% in May, a decrease of 30 basis points from the previous month but up 290 basis points over the last twelve months.
The national spread between a lease signed in the past 12 months and the overall in-place average rent was $1.79 per square foot. This spread has gradually shrunk over the last year as the supply boom completed, and occupiers gained the upper hand in lease negotiations. In May 2024, the premium for a new lease was $2.25 per square foot.
Although the spread between new leases and the average of all in-place rents has shrunk on a national level, some markets continue to see large average premiums paid for a new space. Bridgeport had the largest spread, with a new lease costing $4.01 more per square foot than the market average. Other markets with large premiums were Miami ($3.82 per square foot), New Jersey ($3.59), Charlotte (3.58), and Seattle ($3.06).
Supply
Supply Outlook Darkens
As of May, 342.3 million square feet of industrial space (1.7% of stock) were under construction nationally, and 117.8 million square feet had been delivered, according to Yardi Research Data.
In all, 86.9 million square feet of starts were recorded through May, putting 2025 on pace for
the lowest amount of starts this decade.
National Industrial Supply Pipeline Trend (Million Sq. Ft.)
While we have long anticipated starts to pick back up sometime in 2026, recent events threaten to upend this outlook. Uncertainty around tariffs has delayed leasing decisions for many occupiers, slowing the rate at which recently delivered new supply is being absorbed. Uncertainty has also led to fewer interest rate cuts than previously anticipated, keeping costs for construction loans elevated and putting downward pressure on new starts. Perhaps the biggest threat to a rebound in industrial starts, however, is a 50% tariff on imported steel. U.S. firms imported $32 billion in steel in 2024, and the current demand for steel far exceeds its current production capacity. Further complicating matters, the U.S. and Canadian steel industries supply chains are integrated across the border.
Transactions
Investors Hot for Phoenix
Industrial transactions totaled $21.4 billion during the first five months of the year, according to our U.S. industrial market report, with properties trading at an average of $133 per square foot.
Due to its growing status as a logistics and manufacturing hub, Phoenix has continuously been a top target for investors in recent years. Despite being the tenth-largest market by total square footage, Phoenix’s $862 million in sales this year ranks sixth in the nation after finishing with the third-largest volume in 2024. Sale prices have averaged $187 per square foot this year in Phoenix, an increase of 14.2% over 2024 and 24.4% over 2023. The market has been delivering 34.2% of total stock since the start of the decade, but continues to see high levels of absorption as tenants target it.
2025 Year-To-Date Sales (Million)
Starwood Capital Group has been an active seller in Phoenix this year, executing two portfolio transactions, disposing properties it acquired during a flurry of purchases in 2020-2021. Earlier this year, BKM Capital Partners purchased a three-property, nine-building Phoenix portfolio from Starwood. The transaction totaled $156.8 million dollars, for 778,000 square feet across the Phoenix – West and Tempe submarkets. Shortly thereafter, Longpoint Realty Partners acquired a 518,000 square foot portfolio from Starwood for $110 million.
Western Markets
Los Angeles Boasts Highest Sale Prices Nationwide
Several Western markets posted industrial vacancy rates above the national benchmark of 8.5% during May. Denver recorded the highest vacancy rate in the region and the third-highest nationally at 11.1%, reflecting a 270-basis-point increase year-over-year. At the other end of the spectrum, Phoenix (7.4%) and Orange County (6.8%) maintained some of the lowest vacancy rates in the nation, though both markets also experienced notable year-over-year increases of 270 and 200 basis points, respectively. Meanwhile, the Central Valley posted the steepest annual vacancy growth in the region, with the average rate climbing 570 basis points to 9.8%.
In May, Western markets continued to be the most expensive region for industrial rents nationwide. Orange County led all U.S. markets with in-place rents averaging $16.69 per square foot, reflecting a 7.5% year-over-year increase. The market also posted the nation’s highest average rate for newly signed leases, approaching $20 per square foot, underscoring its premium pricing environment. Los Angeles followed closely, with average in-place rents reaching $15.23 per square foot. New lease rates in the market were also among the highest nationally, with deals signed over the past 12 months averaging $16.03 per square foot. In contrast, the Central Valley continued to offer the most affordable industrial rents in the West, with in-place rates averaging $6.61 per square foot.
West Regional Highlights
Central Valley also ranked among the least expensive markets for industrial investment nationwide with average sale prices at just $67 per square foot. Still, the market saw healthy investor activity, totaling $414 million in sales year-to-date. Overall, Western markets remained among the most expensive in the nation for industrial investment in May, with several major hubs continuing to outpace national pricing benchmarks. Los Angeles led the nation with industrial assets trading at an average of $311 per square foot, while also posting one of the highest sales volumes in the U.S. at $929 million year-to-date. Orange County followed closely, with prices at $282 per square foot and a robust $559 million transaction volume, underscoring sustained investor demand in Southern California.
Phoenix remained the West’s leading hub for industrial development in May, with 16.9 million square feet underway—the second-largest pipeline nationally as a percentage of stock, at 3.9%. However, the market saw a sharp decline from 38.7 million square feet underway at the end of May 2024. At the same time, the Inland Empire had one of the largest industrial pipelines nationwide, with 8.8 million square feet under construction, nearly doubling its pipeline from 4.5 million square feet a year earlier.
Midwestern Markets
Columbus Emerges as the Top Development Hub in the Region
The Twin Cities recorded the highest in-place industrial rent in the Midwest at $7.32 per square foot in May, remaining below the national average of $8.54 per square foot. The market also registered the widest lease spread in the region, at $1.37 per square foot, edging close to the national average ($1.78 per square foot). Kansas City ranked as the second-most affordable U.S. industrial market, after Memphis, with rents averaging just $4.91 per square foot, following a modest 3.2% year-over-year increase. The market was also one of three Midwestern ones—alongside Columbus and Cincinnati—to post negative lease spreads, illustrating the broader pricing challenges that continue to weigh on the region.
All Midwestern markets trailed the national average for sale prices, with Cleveland recording the lowest rate nationwide at just $35 per square foot. In May, Chicago led the Midwest in industrial investment, posting the highest sales volume year-to-date at over $1 billion, even as average sale prices remained modest at $92 per square foot—well below the national rate of $133 per square foot.
Midwest Regional Highlights
In May, Columbus emerged as the most active industrial development market in the Midwest, with 7.5 million square feet under construction, representing 2.3% of total stock. The market edged ahead of other major hubs, including Detroit (7.4 million square feet), Chicago (7.2 million), and Indianapolis (4.8 million). After leading the region in April, Kansas City was surpassed by these four markets, signaling a shift in development momentum across the Midwest. At the other end of the spectrum, Cleveland recorded the smallest pipeline in the region, with only 2 million square feet underway at the end of May.
In May, Indianapolis emerged as the most challenged market in the region, with an industrial vacancy rate of 10.9%, well above the national average. However, the majority of the remaining Midwestern markets stood below the national vacancy rate, displaying increased resilience and high industrial demand.
Southern Markets
Miami Leads the Nation in Rent Growth
Vacancy rates across most Southern industrial markets remained above the national average of 8.5% in May, with Miami posting the second-highest vacancy rate nationwide at 11.7%. Meanwhile, Dallas–Fort Worth also faced increased vacancy pressures, with the rate climbing to 10.2% following a substantial 490-basis-point year-over-year increase. In contrast, Atlanta (8.4%) and Tampa (8.2%) were among the few Southern markets to maintain industrial vacancy rates below the national benchmark.
Dallas–Fort Worth remained the national leader in industrial construction in May, with 28.1 million square feet underway, equal to 2.8% of its total stock. Meanwhile, Houston posted the third-largest pipeline among major U.S. markets, with 14.2 million square feet under construction—more than double the 6.8 million square feet recorded a year earlier. Memphis followed closely with 12.5 million square feet in development, which represented 4.2% of total stock—the highest share nationally.
South Regional Highlights
Southern industrial markets saw strong investment activity through May, led by Texas powerhouses Dallas–Fort Worth and Houston, which posted the region’s largest transaction volumes at $1.3 billion and $507 million, respectively. However, both markets posted sale prices below the national average of $133 per square foot. Conversely, Baltimore continued to top the region in sale prices, with industrial assets trading at $176 per square foot—a significant increase from $123 per square foot a year ago. Charlotte also posted notable appreciation, with sale prices rising from $71 to $124 per square foot year-over-year.
In May, Baltimore posted in-place industrial rents of $8.51 per square foot, remaining slightly below the national average. Despite this, it ranked as the South’s second-most expensive market, after Miami. New leases in Baltimore averaged $10.34 per square foot, aligning closely with the national benchmark and reflecting a moderate level of upward pricing pressure. Miami continued to lead the region with the highest industrial rents, averaging $12.72 per square foot after a robust 9.8% year-over-year increase, the highest nationwide. Newly signed leases in the market reached $16.54 per square foot, resulting in a lease spread of $3.82—the second-widest nationally—underscoring continued industrial rent growth in South Florida’s logistics sector.
Northeastern Markets
New Jersey Tops the Nation in Industrial Sales Volume
New Jersey solidified its position as the top industrial market, recording the highest sales volume nationwide at nearly $1.5 billion as of May. The market also ranked among the most expensive in the country, with industrial assets trading at an average of $276 per square foot—a figure surpassed only by Los Angeles and Orange County. At the other end of the spectrum, Bridgeport remained the region’s most affordable market, with sale prices averaging just $60 per square foot and a smaller total sales volume of $142 million.
New Jersey continued to lead the Northeast in industrial rents, with in-place rates averaging $11.89 per square foot. Moreover, newly signed leases in the market climbed to $15.48 per square foot, posting a $3.59 per square foot lease spread, the third-widest nationwide. Philadelphia was the only Northeastern market with in-place rents below the national average, at $8.33 per square foot. Boston saw solid year-over-year industrial rent growth, with in-place rents rising 6.2% to $11.38 per square foot. Meanwhile, Bridgeport registered the nation’s widest lease spread at $4.01 per square foot, highlighting significant pricing differentials between existing and newly signed leases in the market.
Northeast Regional Highlights
Industrial vacancy trends in the Northeast displayed significant variation in May. Boston (10.5%) and New Jersey (8.9%) continued to post rates above the national average of 8.5%. In contrast, Bridgeport recorded the lowest industrial vacancy rate among top U.S. markets at 5.5%.
Boston and Bridgeport saw limited development activity in May, with Boston having the smallest industrial pipeline among all major U.S. markets, with just 995,000 square feet underway—roughly half the volume it posted a year earlier. Conversely, Philadelphia continued to lead the Northeast in industrial development, with 8.4 million square feet of space under construction, maintaining a steady pace consistent with 2024 levels.
Economic Indicators
Warehouse Employment Slide Continues
The warehousing and storage subsector of the labor market declined again in May, losing 5,100 jobs in the month and decreasing by 1.2% year-over-year. However, while employment has slipped in recent years, workers that remained in the sector have seen pay bumps. The average hourly wage for warehousing and storage has increased 14% in the past three years, according to BLS data.
Warehousing and Storage Employment
Despite recent declines, many of the gains during the e-commerce boom have become entrenched and the sector remains substantially larger than it was before the pandemic. In May 2025, there were 543,000 more jobs in warehousing and storage than at the end of 2019, an increase of 42.3%. Given the current uncertainty in the logistics sector, we do not anticipate a recovery of warehouse and storage employment anytime soon. Firms, for the most part, will spend the coming quarters looking to optimize their supply chains through automation and other technology, rather than through expansion of their workforce.
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.
CommercialCafe collects listing rate and occupancy data using using Yardi Commercial 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.
Stage 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 CommercialCafee industrial report coincide with the ones defined by the CommercialCafe Markets Map and may differ from regional boundaries defined by other sources.
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