Chapter 4
Industrial
U.S. Real Estate Market Outlook 2026
5 Minute Read
5 Minute Read
Trends to Watch
- Industrial leasing activity will rise slightly in 2026:
Tenants will continue to renew space at record levels, expand domestic manufacturing capabilities to mitigate tariff-related costs, upgrade to a plethora of available first-generation distribution facilities or outsource distribution to 3PL providers. - Vacancy will stabilize due to a lack of speculative completions:
Despite minimal net absorption due to many lease expirations in older facilities, vacancy will stabilize in the mid-6% range. - Occupiers will leverage the use of AI to improve service to consumers:
This will create a resilient supply chain and location optimization from a labor, cost and power availability standpoint. Locations that can best meet these requirements should offer compelling investment opportunities. - Incentives for early lease renewals will increase:
Older industrial space is being returned at a robust pace, evidenced by the more than 100 million sq. ft. of negative absorption in pre-2020 buildings last year. To encourage earlier renewals by occupiers, many landlords are offering more generous tenant-improvement allowances and longer free-rent periods. On average, occupiers signed renewals 219 days prior to expiration in 2025, nearly 30 days sooner than in 2024. We expect this trend to continue in 2026. - Mega big-box occupiers will want to quickly upgrade their space:
Availability of first-generation facilities in certain markets is expected to quickly dwindle. Louisville, Columbus, Greenville, Chicago, Phoenix, the Inland Empire and Kansas City all have a limited amount of available first-generation blocks of 500,000 sq. ft. or more. Lease expirations in this size range will accelerate over the next three years, increasing the potential tenant base.
Outlook
CBRE forecasts a 5% year-over-year increase in industrial leasing activity to nearly 1 billion sq. ft. Lease renewals will account for more than 35% of total volume, well-above the historical average of 24%.
New leasing activity will remain on par with 2025, driven by a flight to quality and more outsourcing of distribution operations, as well as continued reshoring of manufacturing operations.
Figure 6: New Industrial Leases vs. Renewals
Source: CBRE Research, Q4 2025.
New leasing activity will be driven by a flight to quality to take advantage of taller clear heights and stronger power or outsource their distribution operations to 3PL providers.
We estimate that 3PLs will account for more than 35% of leasing activity this year. More reshoring of manufacturing operations is expected to mitigate tariff-related costs. Because many 3PLs require shorter lease terms and more flexible spaces, often with a smaller footprint than retailer distribution operations, outsourcing will continue to help retailers and manufacturers realize a more efficient distribution process.
Occupiers will increasingly use AI and diversify supply sourcing, including from domestic manufacturers. Available labor and the need for more power will drive demand in the Midwest, mid-Atlantic and Southeast regions. Markets such as Louisville, Nashville, Cincinnati, Chicago, Detroit and Kansas City will be most attractive for occupier expansions, particularly for manufacturing operations.
Despite a flight to quality, speculative development will be minimal in 2026 due to an oversupply of vacant first-generation space and difficulty obtaining construction financing. However, build-to-suit development will increase to meet more specialized occupier requirements.
Rent growth will remain subdued as the industrial sector adjusts to shifting trade policies and slower economic growth. Despite the volatility, rents in gateway markets like Atlanta have begun to turn the corner. Secondary markets such as Nashville and Louisville are expected to maintain relatively strong rent growth due to reliance on domestic regional distribution that generally is not affected by international trade volatility.
Rent growth will remain subdued as the industrial sector adjusts to shifting trade policies and slower economic growth. Despite the volatility, rents in gateway markets like Atlanta have begun to turn the corner.
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Industrial & Logistics
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