Developers, Investors Reenter the Industrial Market as Confidence Builds

Industrial market fundamentals are showing renewed strength heading into 2026, signaling a more stable outlook after years of volatility tied to supply chain disruptions, fiscal policies, trade negotiations and delayed tenant decision-making, according to Avison Young's Q4 2025 U.S. Industrial Market Report.

Although the sector posted its first negative annual net absorption since 2009, the second half of the year saw leasing activity accelerate sharply, culminating in a strong fourth quarter, creating momentum for 2026. For the first time in the post-COVID cycle, national vacancy did not rise quarter over quarter; instead, it plateaued at 9.3% by year-end. That stabilization suggests the market may be returning to equilibrium as tenant demand begins to outpace newly delivered supply, Avison Young said. Continued e-commerce growth, rising manufacturing investment and related supplier demand are expected to bolster occupancy this year.

Net absorption rebounded to 54.9 million square feet in the second half of 2025, the highest level since early 2023. Deals paused earlier due to macroeconomic uncertainty were signed later in the year, reflecting growing confidence. Fourth-quarter absorption marked the strongest total in the post-COVID environment, as robust consumer spending and GDP exceeded expectations.

Development activity is cautiously picking up. After nearly two years of developers pulling back due to tighter financing and economic uncertainty, groundbreakings are expected to accelerate in early 2026 as tenant demand meets limited available space, the report said. Even with this uptick, construction remains well below pandemic-era peaks, when some markets saw projects equal to more than 10% of total inventory under development.

High-growth markets have seen significant inventory expansion in recent years. Post-2019 deliveries now account for more than 20% of total stock in most key metros, with Savannah and Austin surpassing 50% of the existing inventory built in the past seven years. Strong leasing has helped absorb much of that new supply. Traditional industrial hubs, including Dallas, the Inland Empire, Atlanta, Philadelphia and Chicago continued to lead in total leasing volume, with several markets recording gross leasing volumes above 2% of inventory.

E-commerce sales reached a record 16.4% of total retail sales, reinforcing long-term logistics demand. Investment activity also strengthened, with 2025 volumes exceeding pre-COVID levels and deal flow accelerating in the second half. With ample dry powder ready to be deployed, industrial investment is expected to continue rising in 2026, Avison Young said.