The Industrial Sector
Like retail, high and rising uncertainty is generally negative for industrial leasing activity. Fundamentals in the U.S. are on a decidedly downward trajectory with slower leasing combining with the last remnants of the recent supply wave. CoStar estimates that upwards of 40 of the 390 U.S. markets it tracks will have falling rents in Q2 2025, up from zero a year ago. That said, closer-in and smaller warehouses are performing better relative to the oversupply of large warehouses in more remote locations. In addition, another round of supply chain reconfiguration is likely to result from the tariffs as more clarity arises.
Key Takeaway:
Another round of supply chain reconfiguration is likely to result from the tariffs as more clarity arises.
European industrial markets are experiencing similar trends with slowing but still average fundamentals. A decrease in tenant demand has caused rent growth to slow, though Europe’s generally higher supply constraints should prevent the short-term overbuilding that has occurred in the U.S.
The Opportunity:
Smaller warehouses and Class A logistics facilities near irreplaceable infrastructure may open up as trade routes shift
