The industrial real estate market is shaking off its slowdown and settling into a steadier rhythm. After a wave of speculative construction and a brief pause in demand, the sector is seeing backlogs of space gradually absorbed as leasing activity picks up, vacancy stabilizes, and tenants recalibrate their footprints.
Demand drivers are shifting
The approach to leasing has drastically changed over the past two-and-a-half years, with occupiers now putting stronger emphasis on the physical attributes of the properties they will occupy. These include location, energy-efficient modern buildings with good access for trucking (dock-high), and proximity to labor.
The result of this change is that many older buildings will remain on the market longer than before, whereas Class A properties located near intermodal hubs are leasing very quickly. Most transactions are smaller than those of the pandemic-era mega-lease period but, in total, more transactions are taking place across different industry sectors, including logistics, light manufacturing, third-party logistics providers (3PL), and last-mile logistics hubs (like Miami) where near-shoring and Latin America are creating increased demand.
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In addition to adapting to changes in demand from occupiers, landlords are also adapting their tenancy and lease structures. Many have reverted back to fewer incentives compared to what was common in 2021-2022, but landlords continue to offer tenants to encourage leasing.
For example, landlords may offer free rent for an agreed-upon period of time or provide tenant improvement (TI) allowances to bridge the gap on second-generation buildings. Build-to-suit is still an attractive option for those occupiers that need a specialized solution, though most landlords are offering less favorable financing terms due to rising interest rates. Therefore, many tenants are electing to extend on a short to mid-term basis while waiting for future rate increases to level off.
Lastly, the tight land supply in Miami-Dade and strong consumer spending have led to an increase in competitive bids for last-mile infill locations.
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Vacancy and rents find a new equilibrium
The national vacancy rate is currently around 7.50 percent, indicating that the increase in supply has reached its peak. With the addition of new space, the level of vacancy will continue to decline. However, rental growth has slowed significantly from the previously experienced double-digit growth and has changed from a two-digit to a modest increase in most markets, along with increased discounting on commodity properties with a new supply glut.
Market differentials are starkly evident throughout the U.S., as the inland gateway markets are more strongly connected to port and rail corridors than the tertiary markets. Inland gateway markets (such as the Inland Empire) are considered to have a higher level of absorption than other tertiary regions, such as Texas, Florida or the Southeast.
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On the contrary, infill properties that are experiencing land constraints are still able to maintain their pricing power due to limited supply of development. Miami continues to be the strongest inland market in the country and will remain so due to its significant level of port throughput and cold storage needs, in addition to its growing number of 3PL providers supporting trade within North America and around the world.
Construction pipeline narrows, quality matters more
Developers have throttled back new starts, especially on large speculative boxes. Projects that do move forward emphasize clear heights, trailer parking, EV-ready infrastructure, and solar-ready roofs to meet both ESG goals and operational savings. As the pipeline thins, the market is gradually digesting the 2023–2024 wave of deliveries, setting the stage for healthier fundamentals later in 2025.
Capital is selective but present. Core buyers favor stabilized, modern assets with long lease terms, while value-add strategies focus on repositioning well-located B assets with functional upgrades. Lenders are rewarding strong tenancy and sponsorship, and spreads have begun to tighten as risk sentiment improves. In South Florida, cap rates have shown relative resilience for well-located infill products given scarce replaceable land and port-driven demand.
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Original news report from GlobeSt. The article covers the industrial sector’s stabilization as backlogs are absorbed and activity increases, with Miami highlighted as a resilient, trade-driven node.