The U.S. industrial sector, long the darling of commercial real estate, is now transitioning from hyper-growth to a more measured, mature phase. After years of record absorption and relentless rent gains, the market is digesting a surge of new supply and seeing vacancy rates return to levels not seen in over a decade. This phase shift is reshaping capital allocation, underwriting guardrails, and operator behavior, as evidenced by major institutional moves—including EQT’s $4.2 billion portfolio exit. As fundamentals rebalance, the sector’s outlook remains constructive but demands renewed caution, discipline, and focus on differentiation.

By Q2 2025, U.S. industrial vacancy stood at 7.3% (up from roughly 5.5% a year prior), the highest since 2013, per Colliers and CRE Daily data. This increase stems from a wave of new construction—71 million sq. ft. delivered in the quarter—outpacing net absorption, which lagged at 23 million sq. ft. The result is five consecutive quarters where supply exceeded demand, a reversal from the previous cycle’s chronic shortage. Developers and lenders, seeing vacancy spike and lease-up times slow (now 12–18 months for stabilization), have sharply decelerated new starts—construction activity is down 60% from the 2022 peak. On balance, the sector is self-correcting: fewer launches today could help vacancy retreat if economic growth holds.

EQT’s full-scale portfolio sale (33 properties, 4.2 million sq. ft.) marks a bellwether moment for institutional capital. Ares Management’s acquisition of a Nashville tranche at $206/sf and cap rates drifting into the high-5% range point to a pricing plateau. As one logistics REIT executive said, “18 months ago, we were fighting to get any warehouse at a 4 cap. Now we’re seeing deals at 5 caps and we’re still being picky.” Investors are now underwriting stabilized vacancy at 7–8% and demanding higher going-in yields—at least 150–200 bps above debt costs. Meanwhile, construction financing is tight, with lenders requiring more equity and pre-leasing. In turn, operators who rode the boom are pruning portfolios, locking in gains as fundamentals soften.

Rent growth continues—averaging 4% YoY nationally to $10.54/sf—but momentum has cooled from the double-digit pace of 2021–22. Primary distribution hubs such as Dallas and the Inland Empire saw rents hold firm or edge up, while overbuilt secondary markets (Phoenix, Indianapolis) experienced slight rent dips (<2%). Regionally, the Midwest remains the tightest (5.4% vacancy), while the South is loosest (8.6%). Coastal infill markets, especially Northern New Jersey (~4% vacancy), remain supply-constrained and attract premium capital. By contrast, exurban big-box properties face headwinds as availability climbs and tenants become more selective. Ultimately, location and size now drive performance disparity.

Operators are recalibrating underwriting: vacancy assumptions have shifted from near-zero to 7–8%, lease-up periods have doubled, and more concessions (free rent, commissions) are standard. Landlords are diversifying tenant rosters, targeting 3PLs and light manufacturers as e-commerce expansion moderates. Capital expenditure budgets are rising to reflect tenant expectations for amenities, automation, and sustainability. Asset managers report breaking up large boxes to attract smaller tenants and offering more flexible lease terms. As one midwestern portfolio manager put it: “We’re spending on demising walls and extra docks, but we think we can lease each half to different users—the era of one tenant taking 600k in Columbus is on pause.”

Should economic growth persist and supply pipelines remain muted, national industrial vacancy could plateau near 7.5% by early 2026 before tightening. Rent growth may slow further to 1–2% in 2026; outright declines seem unlikely unless demand falters sharply. Investment capital remains abundant but selective, favoring infill and urban logistics over commodity big-box. More portfolio deals or recapitalizations could emerge as owners rebalance risk and liquidity. If holiday retail and supply chain demand rebound, absorption may surprise to the upside. Conversely, a recession would test landlord resilience and delay market balance.

Discipline, not euphoria, is the new currency—capital is rewarding patience as the cycle resets.