While White House tariff posturing continued in Q2 25, the national industrial commercial real estate market remained steady. Quarterly reports indicated a declining yet consistent absorption rate, vacancies that are edging higher, and moderating rent growth.
Variations Abound
Cushman & Wakefield’s MarketBeats explained that rent and lease variations are taking place based on markets, building sizes and asset classes. Colliers’ US Industrial Market Statistics report agreed, pointing out that rents are correcting in “several dynamic coastal markets that experienced especially strong rent increases in 2022 and 2023.”
At the same time, the Cushman & Wakefield analysts pointed out that tariff-related impacts are beginning to emerge, especially in West Coast markets. Lee & Associates’ Market Reports added that slowing tenant growth has meant a higher degree of choice for users “that have been subjected to a prolonged stretch of steep rent growth.”
Size Matters – And So Do Tenants
Speaking of building sizes, smaller industrial facilities seem to receive the most love during the previous quarter. The JLL Industrial Market Dynamics report noted that there was more demand for smaller spaces, while there was less call for 500,000 square-foot to 750,000 square-foot buildings. And according to Plante Moran’s Real Estate Market Report, “demand for small-based industrial facilities continues to outstrip supply as there is minimal new construction in the segment.”
At the same time, renewals are on the rise. The Lee & Associates report explained that multiple leases are renewing at higher rates, especially among smaller spaces “where inventories remain tight.” CBRE’s US Industrial Figures report agreed, indicating that the size sweet spot ranged between 300,000 square feet and 700,000 square feet, while larger tenants remain on the sidelines in terms of leasing plans.
JLL also said that third-party logistics firms led the way in Q2 leasing activities. Such businesses “will continue to be the beneficiaries of the current tariff environment, as companies hesitant to commit to long-term real estate decisions will continue to leverage these third-party relationships.”
Then, There’s Construction
All of the reports commented on a dwindling construction pipeline, though the Colliers report indicated that a continued uptick in construction completion led to higher vacancy rates. Furthermore, the JLL experts explained that completions outpaced net absorption’s in Q2. Meanwhile, Cushman & Wakefield analysts noted that new deliveries reached a five-year low.
The Crystal Ball
While most of the report language remained fairly optimistic, there was little doubt that concerns over tariffs need to be taken seriously. JLL experts pointed out that delayed decision-making due to tariff uncertainties was one reason for the higher vacancies. Plante Moran analysts agreed, adding that tariff uncertainty combined with construction costs will continue to impact overall building expenses.
Cushman & Wakefield experts believe that industrial demand will likely remain soft due to weak consumer confidence, spending pullbacks and inflation. Port-dependent and regional distribution hub markets could see slowdowns.
Meanwhile, Colliers analysts predict that fewer deliveries will restore balance to the market as construction starts are aligned more closely with completions. However, Lee & Associates’ experts forecast that supply growth could outpace net absorption in the coming quarters.
JLL noted that manufacturing re-shoring could help industrial, especially in sectors directly impacted by import tariffs and supply chain vulnerabilities.” Cushman & Wakefield analysts agreed, noting that an increase in manufacturing activity could also boost leasing and build-to-suit construction.
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