Dive brief:
- Demand for US industrial real estate space increased in the third quarter, with net absorption reaching its highest level since the first quarter of 2023, according to commercial real estate giant Colliers.
- Net absorption, or the change in occupied space, was 60 million square feet in the third quarter, up nearly 20 million year over year. Despite the jump in the quarter, year-to-date net absorption remains below what Colliers reported for the same period in 2024.
- Phoenix and Indianapolis led the way among markets that saw demand jump in the third quarter, a trend “driven by strong big-box activity, tailored deliveries and strong user sales,” according to Colliers.
Phoenix, Indianapolis lead the increase in demand
Top U.S. industrial real estate markets by net absorption, measured in square feet, in the third quarter of 2025.
Diving knowledge:
Increased demand and a limited pipeline of future supply will help vacancies stabilize in the coming quarters as the industrial property market regains momentum, according to Colliers. Vacancy rates stood at 7.4% in the third quarter, up 72 basis points from a year earlier.
The increase in demand comes as companies feel more comfortable making long-term decisions despite the uncertainty surrounding tariffs, Prologue Chairman Dan Letter said on an October earnings call.
The logistics real estate company is seeing particularly strong demand among e-commerce companies and companies investing in their supply chains to improve service and manage costs. Dollar Tree and Ahold Delhaize are among the companies that have recently announced plans for new distribution centers, and New Balance opened a facility in Salt Lake City last month.
“Clients have definitely become more desensitized to short-term noise while looking at long-term decision-making,” Letter said. “It’s great to see these large, well-capitalized companies leading the way because we typically see small and medium-sized companies following suit here.”
On the supply side, industrial space under construction fell to 270 million square feet in the third quarter, the lowest level since 2018, according to Colliers. However, some markets continue to experience increases in construction, such as Dallas-Fort Worth and Houston.
“This change indicates a more balanced development portfolio, with new projects increasingly concentrated in markets that demonstrate sustained tenant demand,” according to Colliers.
