Chapter 4
Industrial
U.S. Real Estate Market Outlook Midyear Review 2026
5 Minute Read
5 Minute Read
Midyear Outlook
- Industrial leasing demand will be fueled by certain structural drivers: reshoring of manufacturing operations, outsourcing to third-party logistics providers (3PLs) and a rise in specialty products such as data centers and advanced manufacturing. Occupiers continue to vacate older buildings and consolidate into newer functional space, leading to a significant amount of obsolete inventory returning to the market.
- New supply will remain scarce in the coming quarters. Construction of big-box facilities likely will remain at 10-year lows and first-generation blocks of 500,000 sq. ft. or may quickly dwindle in key markets such as Louisville, Columbus, Greenville, Chicago, Phoenix, the Inland Empire and Kansas City. Robust leasing activity during the first half of the year and accelerated renewals put the year on track for record leasing volume.
- Although the flight-to-quality trend by occupiers will accelerate, net absorption should hold steady through year-end. This is because the amount of new supply keeps dwindling, while older facilities account for a larger share of total industrial supply.
- The highest-quality product will continue to outperform and owner-user sales will remain strong, anchored in domestic manufacturing fueled by the CHIPS and Science Act, the Inflation Reduction Act and the One Big Beautiful Bill Act's 100% bonus depreciation and new deduction for qualified production property. Light industrial, by contrast, faces eroding tenant affordability as elevated rents and supply-chain costs compound, leaving landlords to expect longer decision timelines and a more selective tenant pool.
Figure 4: U.S. Annnual Industrial Leasing Activity
Source: CBRE Research, August 2026.
Figure 5: Forecast Industrial Net Absorption for Markets with Highest & Lowest Shares of Pre-2000 Inventory
Source: CBRE Econometric Advisors, Q1 2026.
Key Updates to Forecast
- We have increased our forecast for annual leasing growth to 10% from the 5% we projected in January, led by big-box demand and accelerated renewals. Demand is being fueled by certain structural drivers: 19% year-over-year growth in 3PL leasing, a 27% increase in manufacturing leasing and the continued data center and infrastructure buildout. Together with the Purchasing Managers’ Index of 53.3% as of June 2026—its sixth consecutive month of appreciation—we project that net absorption will rise to approximately 210 million sq. ft. in 2027 from 160 million sq. ft. this year.
- We expect that the availability rate will remain near 9.6% through year-end. High construction and financing costs will hold completions to a decade low of roughly 260 million sq. ft. in 2026. Speculative starts will remain limited and build-to-suit activity will hold steady. Dwindling first-generation big-box supply reinforces our belief that the constraint is due to a limited amount of functional product and not tenant demand.
- Markets with the oldest total inventory continue to see tenant outflows, while those with mostly newer supply capture the bulk of demand (Figure 5). The split is less about demand and more about obsolescence: Older buildings are vacated as occupiers consolidate into newer functional space, which holds the overall availability rate elevated and roughly flat.
- Asking-rent growth will accelerate to about 1.8% by year-end, up from our initial projection of 0.4%. The strongest rent growth will occur in domestic-distribution-driven secondary markets like Nashville and Louisville. Because transportation costs far outweigh rent in supply-chain budgets, higher costs fall on cost-sensitive light industrial. Landlords maintain occupancy through concessions, so the repricing shows up in value and cap rates rather than rents, widening the bifurcation by building age and submarket.
Contacts
Industrial & Logistics
Related Insights
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A majority of industrial occupiers expect to either maintain or expand their real estate footprint this year, according to a recent CBRE survey.
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