By Brandon Glick, Managing Partner, Chicago
After years of historic growth, the U.S. industrial market has firmly entered a new phase in 2026, one defined less by acceleration and more by recalibration.
The fundamentals aren’t broken, but they are shifting.
Where the Market Stands Today
The most notable story this year is the continued rise in vacancy.
After nearly three years of steady increases, national industrial vacancy has reached 7.6%, with further upward pressure expected in the near term. This rise has been driven largely by the wave of new supply delivered over the past 18–24 months, particularly in large-scale logistics facilities.
At the same time, rent growth has effectively stalled:
- Annual rent growth sits at 1.3%
- Quarterly growth is flat (0.0%)
For the first time in years, landlords are no longer able to consistently push rents, and in some segments, particularly big-box logistics, rents are beginning to decline.
Supply vs. Demand: Still Out of Balance
While leasing activity has stabilized, the market is still digesting excess supply.
- Deliveries have continued to outpace net absorption
- Availability has climbed to ~9.6%
- Lease-up timelines have nearly doubled compared to just a few years ago
Even though net absorption has recovered from negative territory in 2025, it remains modest relative to the volume of space hitting the market.
The good news: Construction starts have dropped to 10-year lows, and new deliveries are expected to fall sharply through the back half of 2026 and into 2027.
That supply pullback is what will ultimately rebalance the market, but it will take time.
A Bifurcated Market: Big Box vs. Small Bay
One of the most important dynamics in today’s market is the growing divide between asset types.
Large logistics facilities (100,000+ SF):
- Vacancy has risen above 9%–10%
- Heavily impacted by speculative development
- Facing increased concessions and softer rents
Small-bay industrial (<50,000 SF):
- Vacancy remains below 5%
- Limited new supply
- Continued rent growth and strong demand
This divergence creates two very different leasing environments and requires a much more nuanced strategy depending on product type.
Tenants Regain Leverage
For occupiers, 2026 represents a meaningful shift in negotiating power.
We’re seeing:
- Increased concessions (free rent, TI, flexibility)
- Longer lease-up periods creating leverage in negotiations
- More options across most size ranges
In many cases, 3+ months of free rent on a 5–7 year deal is back on the table, a stark contrast from the landlord-driven market of 2021–2022.
That said, leverage is not universal. High-quality, well-located assets and especially smaller spaces remain competitive.
Economic Headwinds to Watch
Several macro factors are shaping industrial demand this year:
- Trade uncertainty and tariffs are creating volatility in import activity and inventory levels
- Consumer spending on goods is slowing, particularly among lower-income households
- Inflation remains elevated, limiting purchasing power
- Interest rates are staying higher for longer, impacting both development and occupier expansion
There is also a growing risk scenario: A mild recession could push vacancy into the 8%–9% range and trigger the first meaningful decline in rents since the Great Recession.
Capital Markets: Activity Returns, but with Discipline
Despite softer leasing fundamentals, investment activity has rebounded:
- Sales volume is up significantly year-over-year
- Institutional capital is returning to larger deals
- Cap rates have expanded into the mid-5% to 6% range
Investors are becoming more selective, with a noticeable preference for:
- Stabilized assets
- Single-tenant properties with durable income
- High-quality logistics in core markets
At the same time, owner-user acquisitions are on the rise, signaling long-term confidence in the sector.
What Happens Next?
Looking ahead, the path forward is becoming clearer:
- Vacancy will likely continue rising through 2026, before peaking below 8% in a base-case scenario
- New supply will continue to decline, helping restore balance
- Rent growth will remain muted in the near term
- Leasing activity should gradually improve as uncertainty stabilizes
By 2027, the market is expected to begin tightening again but not at the pace we saw in the previous cycle.
The Broker Perspective
This is no longer a momentum-driven market, it’s a strategy-driven one.
Success today requires:
- Understanding submarket and product-level differences
- Structuring deals creatively
- Timing the market effectively for both landlords and tenants
The days of “take it or leave it” leasing are over for now.
Final Thoughts
Industrial real estate is not declining, it’s normalizing. The demand drivers that fueled the last cycle; e-commerce, supply chain resilience, and domestic production are still very much intact.
But today’s environment is more balanced, more selective, and more complex. In markets like this, execution matters more than ever.
