In the rapidly evolving market landscape, what factors are enabling the U.S. industrial real estate sector to maintain stability? According to Cushman & Wakefield's recently released U.S. Industrial Market Report for Q2 2023 , the answer is clear: logistics resilience. The report reveals that industrial real estate activity remained steady in the second quarter, with net absorption reaching 29.9 million square feet—nearly identical to Q1's 30.3 million square feet and exceeding industry expectations, primarily driven by robust demand for newly constructed logistics facilities.
Structural Demand and Regional Variations
More specifically, Cushman & Wakefield noted that newly built warehouse facilities have contributed over 50 million square feet of absorption since 2023 began, demonstrating sustained demand for high-quality properties. However, structural challenges persist: certain regions are experiencing increased consolidation and workforce reductions, leading to demand lagging behind supply—particularly in Western markets where net absorption turned negative at 2.3 million square feet. The Inland Empire and Los Angeles areas saw declines of 1.8 million and 1.1 million square feet, respectively.
Key Market Indicators (Q2 2023):
- New leasing activity: Approximately 30.9 million square feet year-to-date, up 0.3% annually but down 5.0% compared to pre-pandemic 2019 levels
- Q2 new leasing: ~15.7 million square feet, a 3.4% quarterly increase but 1.0% annual decrease
- New supply completions: Exceeded 71.5 million square feet, down 4.2% quarterly and 44.6% annually
- Vacancy rate: Rose 0.1% to 7.1% nationally, though smaller facilities (<100,000 sq ft) maintained tighter vacancy at 4.4%
- Average rent: $10.12 per square foot, up 0.9% quarterly and 2.6% annually
Tariff Relief and Market Confidence
Jason Price, Cushman & Wakefield's Americas Head of Logistics & Industrial Research, noted that Q2 demand benefited partially from easing historically high tariffs and potential trade agreements with other nations. "This enhanced market clarity has boosted transaction confidence among corporate clients," Price explained. "Meanwhile, rental rate corrections in most markets are enabling tenants to secure more favorable deals."
"While rising vacancy (up 20 basis points quarterly) and declining new supply have improved market stability, some regions continue facing challenges from corporate relocations and consolidations," Price observed. Regarding the 7.1% vacancy rate, he emphasized that this aligns with the 15-year pre-pandemic average—"elevated but still considered moderately healthy."
Future Outlook
Looking ahead, Cushman & Wakefield projects that new supply will continue outpacing absorption through most of 2025 and 2026. However, by 2027, annual absorption is expected to surpass new deliveries—a potential inflection point for market equilibrium.
The report highlights shifting development patterns, with build-to-suit projects now comprising 30.4% of deliveries (up from previous quarters) while speculative development has declined to 62.3%—the lowest proportion since Q2 2020. Geographically, Southern and Western markets accounted for 68% of new supply, though this represents a 59% reduction from peak delivery volumes in late 2022.