The U.S. industrial real estate market demonstrated notable resilience in the second quarter, with activity levels remaining stable and exceeding expectations, according to a new report from Cushman & Wakefield. Net absorption reached 29.9 million square feet in Q2, nearly matching Q1’s 30.3 million square feet, driven primarily by demand for newly constructed logistics facilities.
However, performance varied significantly by region. While national absorption was buoyed by newly built warehouses (delivering over 50 million square feet of space absorbed since 2023), the Western U.S. saw negative net absorption of 2.3 million square feet. Southern California markets like the Inland Empire and Los Angeles recorded declines of 1.8 million and 1.1 million square feet, respectively.
Key Findings from the Report
- Leasing activity grew 0.3% year-to-date to 30.9 million square feet but remains 5.0% below pre-pandemic (2019) levels.
- Q2 new leases totaled 15.7 million square feet, up 3.4% quarterly but down 1.0% year-over-year, with seven major markets accounting for over 500 million square feet of leasing volume.
- New supply fell to 71.5 million square feet in Q2, down 4.2% quarter-over-quarter and 44.6% year-over-year. The South and West regions contributed 68% of deliveries, though supply has dropped 59% from Q3 2023’s peak.
- Build-to-suit projects now represent 30.4% of 2024 deliveries, up from 16.8% last year, while speculative construction declined to 62.3%—the lowest share since Q2 2020.
- Vacancy rates edged up 0.1% nationally to 7.1%. Smaller warehouses (under 100,000 sq. ft.) maintained tighter vacancies at 4.4%, though this marked a 0.8% annual increase.
- Average rents rose to $10.12 per square foot, up 0.9% quarterly and 2.6% annually. Smaller facilities commanded a 31% premium at $13.51/sq. ft., with 18 tracked markets posting over 5% yearly rent growth.
“Tariff relief and expectations of new trade agreements contributed to Q2 demand,” noted Jason Price , Head of Americas Logistics & Industrial Research at Cushman & Wakefield. “The market continues to prioritize high-quality space, even as supply-demand imbalances persist in some regions.”
The report underscores a bifurcated market: robust demand for modern logistics facilities contrasts with softening conditions in oversupplied submarkets, particularly in the West. Developers appear to be responding with more cautious supply growth, focusing on build-to-suit projects over speculative development.