Industrial vacancy has stopped climbing. After two years of gradual loosening, the sector’s Q3 2025 vacancy rate held near 6.6% — its first unchanged reading since 2022. That plateau, paired with 53.3 million SF of quarterly absorption, signals a sector regaining balance. As 3PLs and retailers resumed leasing, supply finally met demand. In credit terms, the market’s “soft landing” arrived early: stability without contraction.

Tenants re-entered decisively. Year-to-date absorption hit 79 MSF, with two-thirds realized in Q3 alone. Logistics and e-commerce groups drove activity as supply-chain normalization restored inventory confidence. By contrast, the prior five quarters combined barely matched that total. The return of build-to-suit deliveries pre-leased to major tenants helped fill the gap. In turn, landlord leverage steadied; incentives normalized to ~1–2 months’ free rent per lease year. For now, the tenant–landlord balance has reset to equilibrium.

Developers have resumed select starts — mostly in markets below 5% vacancy or for single-tenant facilities. Space under construction reached 226.9 MSF, up slightly from Q2 but still well under pandemic highs. Meanwhile, completions exceeded absorption for the 13th straight quarter. The oversupply delta is narrowing: excess space is being quietly absorbed rather than dumped. On balance, construction lenders remain disciplined, favoring pre-leased or credit-backed projects.

Coastal gateways regained momentum. LA/Inland Empire and Northern New Jersey recorded slight vacancy drops as trade volumes and restocking improved. Big-box hubs such as Dallas and Atlanta remain active but are digesting heavy 2024 deliveries, keeping vacancy <8%. Secondary markets like Phoenix and Savannah are normalizing after surges of new product — with rent growth now 3–4% instead of 15%. Nonetheless, sub-5% markets (SoCal, South Florida) continue to command rent premiums and lower cap rates.

Capital still favors industrial. Debt spreads (SOFR + 200–250 bps) remain the tightest in CRE; equity inflows are steady. Investors assume ~3% annual rent growth and modest leasing spreads (5–10%) rather than the 20–30% of 2022. Underwriters are reinstating downtime buffers — 6–9 months for big boxes — and budgeting $5–15 /SF for TIs. The new playbook prizes credibility over exuberance. Ultimately, valuation resilience rests on perceived durability of cash flows, not perpetual compression.

With rent surges fading, operators are pivoting from expansion to efficiency. Expense control (notably property tax forecasting) and proactive tenant engagement are again differentiators. Modern features — higher clear heights, solar integration, automated docks — enhance renewals and reduce concessions. As one logistics REIT executive put it, “We’ve moved from sprinting for growth to managing endurance laps.” In practice, asset management is the new alpha.

Industrial’s next phase is defined by sustainable demand. JLL and CBRE expect annual absorption to normalize around 175–200 MSF — healthy by historic standards. Rent growth should ease to 3–4% annually, while cap rates likely remain range-bound until rate cuts arrive. Developers will selectively re-enter the market, but supply discipline should prevent another glut. Regional variation will widen: near-port and manufacturing-corridor assets may outperform, while fringe sites face longer lease-up times. Overall, industrial property remains CRE’s steadiest income engine.