More Than Half Of U.S. Warehouse Space Built In Q1 2025 Is Vacant
The U.S. industrial sector can't seem to shake the effects of the pandemic-era wave of warehouse development.
Speculative development accounted for 71% of the 73M SF of industrial space that delivered in the first quarter, according to Cushman & Wakefield. Roughly 45M SF of spec space came online vacant, nudging vacancy up 30 basis points to 7%.
Roughly two-thirds of the 83 markets tracked by Cushman & Wakefield saw vacancy rise in the first quarter.
Occupancy rates for the sector are now back in line with historical averages after the pandemic upended supply chain dynamics, leading to a rush of industrial leasing and development activity, along with a corresponding jump in rents.
Industrial space users were making decisions against an especially uncertain backdrop in the first quarter, as the outlines of President Donald Trump’s trade war came into focus with on-again, off-again tariff proclamations.
Warehouse and logistics operators increased their occupancy by a net 21M SF in the first quarter nationally, while manufacturing saw 30M SF in negative absorption in the first three months of the year.
Leasing volume totaled 140M SF, down 6.4% from the same period a year earlier.
Occupiers, especially those looking to take down large blocks of space, are largely focused on new construction or recently completed buildings. But the number of deals for large footprints has slumped, with vacancy rates at facilities over 250K SF rising above 10%.
Deals between 100K and 300K SF accounted for 40% of first-quarter activity, the same share of transaction volume as a year earlier. But deals larger than 1M SF went from 9% of deal volume in 2024 to 5% of transactions in the first quarter. Occupancy is tightest for the smallest footprints, with properties under 100K SF 96% occupied.
Trends in asking rates vary by market, with nearly 40% of the markets tracked by the brokerage posting declines in the first quarter. Strength in other markets held the overall asking rate flat at $10.11 per SF. The competitive market for smaller space gives properties with a smaller footprint a $2-to-$3 premium on asking rates, Cushman & Wakefield found.
New deliveries outpaced net absorption in the first quarter, with absorption roughly in line with the number of build-to-suit deliveries. The imbalance is forecast to persist through 2026, when Cushman & Wakefield predicts vacancy rates will peak at 7.8%.
The industrial sector continues to work through the wave of new deliveries, with nearly a quarter of markets seeing their construction pipelines halved over the last 12 months. Five markets currently have 10M SF or more under construction, down from 12 markets last year.
