Cushman & Wakefield Market Report: Peak Industrial Vacancy Likely in Rearview Mirror as Demand Holds and Supply Slows
The U.S. industrial real estate market entered 2026 on solid footing, with first-quarter fundamentals signaling a market that is stabilizing and beginning to rebalance, according to the latest market report by Cushman & Wakefield.
Vacancy moved below its late 2025 peak, demand held steady, and new supply slowed to its lowest level since 2017, supporting a constructive outlook for the year ahead.
Building on late-2025 momentum, the market recorded its strongest first quarter for net absorption since 2023, totaling 40 million square feet (msf), up 52% year over year. While absorption moderated from the prior two quarters, first quarter activity is typically the slowest of the year. Over the past 12 months, total absorption reached 198 msf, exceeding full-year totals in both 2024 and 2025 by 31% and 8%, respectively.
"Demand for modern logistics space continues to accelerate as occupiers prioritize automation ready facilities with higher power capacity. In Q1, properties delivered since 2020 captured 68 million square feet of absorption, with nearly half concentrated in large-scale facilities exceeding 500,000 square feet," said Jason Price, Senior Director, Americas Head of Logistics & Industrial Research.
Shifts in global trade policy and geopolitical uncertainty are reinforcing inland supply chain strategies, particularly for large format users. Inland markets captured over 90% of first quarter net absorption, led by Dallas-Fort Worth, Indianapolis, Phoenix, Atlanta and Charlotte. In contrast, several West Coast markets continued to record occupancy declines amid tenant consolidations and relocations. Select port-proximate markets along the East and Gulf Coasts posted solid demand, including Houston (4.9 msf), New Jersey (3.4 msf) and Savannah (1.7 msf).
Leasing activity remained elevated, surpassing 170 msf for the fourth consecutive quarter, driven by large-format transactions of 500,000 square feet or more. National deal volume rose 10.3% year over year, though it declined 9% quarter over quarter from last quarter's peak, which was the highest level since 2022. The flight to quality persisted, with 61% of leases 100,000 square feet and larger occurring in buildings delivered this decade. Among large-format deals, 54% were in facilities with 40-foot clear heights, while 3PLs and manufacturers accounted for 60% of activity and inland markets represented 70% of total large-format volume.
With steady demand, muted completions and fewer vacant sublease blocks coming to market, national vacancy has likely moved past its cyclical peak. The U.S. vacancy rate ended Q1 at 7.0%, unchanged from year-end but 10 basis points below the Q3 2025 peak. Vacancy declined across three of four regions quarter over quarter, while the West rose 20 basis points to 7.9%.
"Leasing activity continues to show real durability across markets, size segments, and building types. As we move through 2026, we expect demand to remain resilient, with corporate occupiers staying disciplined and focused on cost efficiency, network optimization and long-term scalability," said Jason Tolliver, President, Logistics & Industrial.
New supply continued to slow, with completions falling 27% year over year to 54 msf, the lowest quarterly total since mid-2017. Approximately 73% of delivered space was speculative. While completions are expected to remain modest through 2026, renewed groundbreakings in high-demand markets have pushed the national construction pipeline higher for a third consecutive quarter. Total space under construction now stands at 284.1 msf, up 6.2% annually and the highest level since Q3 2024, with notable increases in Memphis, St. Louis, Columbus, Minneapolis and Charlotte.
Annual asking rent growth strengthened to 2.1%, up from 1.1% at year-end 2025, supported partially by tightening fundamentals in several inland distribution hubs. Sixty percent of the 83 markets tracked reported positive annual rent growth in Q1, with 19 markets exceeding 5% growth. Over the longer term, one-third of markets have recorded rent growth above 50%, led by Philadelphia, Baltimore, Nashville, and Fort Lauderdale, each exceeding 80%. While rent growth has moderated, tenants rolling leases continue to face elevated pricing across most U.S. markets.
"Looking ahead, the industrial sector is positioned for steady growth through 2026, with demand expected to reaccelerate in the second half of the year. Occupier activity will be driven by supply chain recalibration focused on cost efficiency and network resilience. Vacancy compression is expected to be led by the 500,000-square-foot segment, across both leasing and user purchases, particularly in newer products, as disciplined development keeps new supply in check," said Price.
"With new supply moderating and leasing holding firm, the market is moving back toward balance," Tolliver added. "That is creating a clear inflection point where available space should begin to tighten, reinforcing investor confidence and keeping capital active in the sector."
About Cushman & Wakefield
Cushman & Wakefield (NYSE:CWK) is a leading global commercial real estate services firm for occupiers and investors with approximately 53,000 employees in over 350 offices and nearly 60 countries. In 2025, the firm reported revenue of $10.3 billion across its core service lines of Services, Leasing, Capital markets, and Valuation and other. Built around the belief that Better never settles, the firm receives numerous industry and business accolades for its award-winning culture. For additional information, visit www.cushmanwakefield.com.
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