April 30, 2025 | Ella Krygiel, BOMA International
The current state of leading industrial markets in the U.S. is one of transition—marked by both perseverance and recalibration. As the first quarter of 2025 wrapped, “demand remained resilient in the first quarter despite tariff uncertainty,” Cushman & Wakefield’s Industrial Q1 report states. This is promising, considering that an additional 34% tariff was placed on Chinese imports (effective April 9), not to mention the 10% baseline tariff on imports from almost all countries (effective April 5), according to PraxiChain. “The first quarter showcased stable fundamentals with leasing activity only 2.5% lower than the same quarter in 2024,” says James Breeze, CBRE Vice President of Global Industrial and Retail Research. “The leading industrial market transaction volume kept pace with the previous year as occupiers shored up locations to service their customers.”
Craig Hurvitz, Director, National Industrial Research at Colliers echoes a similar view: “The leading industrial markets today have seen demand outpacing supply once again, and vacancy rates have peaked and are coming back down.” Both of these perspectives about the current industrial market landscape demonstrate that many experts, like Breeze and Hurvitz, are predicting an industrial market recovery and stabilization.
However, to understand the present market, it’s essential to look back and examine its evolution. Hurvitz notes that, “Historically — and especially during the unprecedented demand during the COVID pandemic — the ‘leading industrial markets in the U.S.’ were the largest in terms of inventory, including Greater Los Angeles, Chicago, Dallas, Atlanta, Northern-Central New Jersey, and Houston.” He points out that this definition of a leading industrial market has evolved over the past two-and-a-half years, as “a record surge of new construction has caused U.S. industrial markets to diverge.”
The Savills Q4 2024 report aligned with Hurvitz’s summary, citing a divergence in industrial performance as some markets normalize while others face high vacancies driven by supply.
Hurvitz further explains this industrial market divergence: “Some markets were overbuilt, increasing their overall industrial inventory by 40% or more. In these markets, new supply far exceeded demand, and vacancy rates rose quickly, in some cases well into the double digits.” However, Hurvitz also mentions that in other markets, “new construction was more constrained, and vacancy only rose briefly, staying in line with or below the U.S. average.”
After analyzing the differences in industrial markets—some of which were overbuilt and experienced high vacancy rates, while others maintained a balanced supply and demand—it’s crucial to understand the factors that enable certain markets to thrive despite these challenges
Breeze outlines the key factors driving the success of top industrial markets: “The top performing markets are ones that can service both a large and/or growing local population and have a logistics advantage (sea or inland port, close proximity to major interstate highways, rail and or commercial air services) to service a wider base. This allows for occupiers to check off multiple lists in servicing but local and regional consumers and clients.”
Among these industrial real estate markets that experienced significant growth, according to the Q4 2024 Commercial Cafe report, Phoenix, AZ, Orange County, CA and Inland Empire, CA are the top best-scoring industrial markets. Phoenix held the title of best-scoring industrial market, with the city scoring highest in industrial space delivered in Q4.
Hurvitz describes the other leading industrial markets today: “Many of these markets are in the Midwest, including Chicago, Cleveland, St. Louis, and Kansas City, but also include Salt Lake City, Houston, and Nashville. Several coastal markets have grown the quickest, even while demand has dropped off. Vacancy has climbed the highest in these markets, which include Charleston, Savannah, Phoenix, Las Vegas, and Indianapolis.”
Breeze offers his insights on how to help lagging markets catch up: “Regions that may be lagging behind are those that are located where population growth has stalled or local regional governments have enacted legislation making it difficult for companies to expand. Owners of real estate will need to account for these obstacles by providing superior service, offering more amenities in buildings, and providing more economic incentives to attract customers.”
When we look ahead to the future of industrial markets for the remainder of 2025, despite tariff uncertainties, demand has remained resilient, and vacancy rates are beginning to decline. Experts predict recovery and stabilization, with successful markets leveraging logistics advantages and servicing large populations. For lagging regions, overcoming obstacles like stalled population growth and restrictive legislation will be key to keeping pace.
Hurvitz pointed out that construction activity and new supply have dropped significantly, with the last of the recent development boom delivering in 2025, resulting in construction levels below pre-pandemic averages. Commercial Property Executive aligns with Hurvitz’s prediction that construction starts will remain limited throughout the year due to rising interest rates, cautious developer sentiment and a cooling demand for space.
Overall, Hurvitz and Breeze share their final thoughts on what the remainder of the year will bring:
- “The current economic uncertainty could cause a drop in demand across the country in the coming quarters,” Breeze says.
- “In markets where more space was delivered and vacancy climbed higher, the recovery will take longer, and absorption will be more gradual,” Hurvitz says. “The next development cycle will be delayed until vacancy rates can begin to return to baseline.”
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