As seen on GlobeSt.
The U.S. industrial market is starting to tighten as occupier demand exceeded new supply for the first time since the recent construction boom began, according to Colliers.
Net absorption reached 58.9 million square feet in the three months through June, up from 50 million square feet in the first quarter and more than double the 27.5 million square feet recorded a year earlier. New supply, meanwhile, declined to 53.4 million square feet from 60.7 million square feet in the first quarter and 74.7 million square feet a year ago.
That marked the first quarter since 2022 in which demand surpassed deliveries. The national vacancy rate declined seven basis points from the first quarter to 7.3%, although it remained slightly above the 7.2% rate recorded one year earlier and well above the 15-year average of 6.2%.
Regional Performance Splits Sharply
The recovery remains highly uneven across regions. The South accounted for 29.3 million square feet of second-quarter absorption, approximately half the national total, led by major logistics markets. Houston posted 7.5 million square feet, the highest volume in the country, followed by Dallas-Fort Worth at 4.7 million square feet and Atlanta at 4.5 million.
However, the South also had the highest regional vacancy rate at 8.4% and accounted for 156.2 million square feet of space under construction, nearly half the national pipeline. Dallas-Fort Worth led the country with 36.3 million square feet underway, followed by Houston with 26.1 million and Atlanta with 18.5 million.
The Midwest remained the tightest region, with 5.4% vacancy. Demand totaled 13 million square feet, slightly exceeding the 12 million square feet delivered during the quarter. Columbus recorded 3.3 million square feet of absorption, while Indianapolis posted 2.9 million and saw its vacancy rate fall 449 basis points from a year earlier.
In the West, 16 million square feet of absorption significantly outpaced 8.6 million square feet of new supply. Los Angeles and Phoenix were among the country’s strongest markets, recording approximately 4.4 million and 4.3 million square feet of absorption, respectively. Results elsewhere were weaker, with the San Francisco Bay Area, Seattle, Portland and San Diego reporting negative absorption.
The Northeast lagged the other regions, generating only 573,000 square feet of absorption against 5.2 million square feet of deliveries. Vacancy rose 19 basis points year-over-year to 8.1%, while the New York City metro recorded nearly 4.9 million square feet of negative absorption.
Construction Picks Up While Rents Lag
Construction is also beginning to recover. The national pipeline increased to 314.3 million square feet, up 8% from the first quarter and approximately 15% from its year-end 2025 low. Colliers expects high construction costs, tighter lending standards and elevated vacancy in some markets to keep development below its previous peak.
Rent trends have yet to reflect the improvement in demand. Average warehouse and distribution asking rents declined 1.6% year-over-year to approximately $10.36 per square foot, with pricing holding up better in the Midwest and selected Southern markets than in coastal and overbuilt markets.
