A Record 1.5B SF Of Industrial Space Is In Search Of Tenants

The remnants of a historic wave of industrial construction paired with an uncertain economy are expected to drive up the amount of empty warehouse space on the market this year.

At the end of 2025, available industrial space, including sublease and direct space, hit record levels — totaling more than 1.5B SF nationwide, CoStar National Director of U.S. Industrial Analytics Juan Arias told Bisnow. 

The industrial vacancy rate at the end of 2025 was 7.5%, and that figure is projected to rise to 7.8% by the end of this year before starting to decline in 2027, according to a forecast from CoStar Group.

The proportion of industrial space sitting empty is at its highest point in more than a decade and twice the vacancy rate in 2023, when it was below 4%, according to CoStar. 

Driving the increase is a wave of big-box logistics space under construction, tenants vacating older warehouses for newer space, and occupiers putting space back on the market. 

"We still have a lot of empty space that needs to come through, and that's going to continue to add available supply to the pipeline," Arias said.

Despite the pipeline of under-construction logistics properties 100K SF or larger decreasing by more than 60% since 2022 to just over 300M SF, nearly 190M SF of that pipeline has no committed tenant, which doubles pre-pandemic heights, according to CoStar.

Unfortunately for those developers, they are delivering those buildings to a market that has historically high levels of sublease space. Of the 1.5B SF on the market, 12% is being offered for sublease, the highest level on record, Arias said.

Sublease space asking rents are 20% below direct-lease market rents, Arias added.

The majority of that space is coming from companies in the housing industry, like furniture, appliances and building materials, following a drop in demand amid a few slow years in the housing market and the homeowner population declining.

"They need a lot of warehousing space because of the nature of their goods. They tend to be more bulky," Arias said. "Their presence, their square footage presence, is much more significant."

All of that adds up to a tenant's market. Rents are projected to grow just 1% in 2026, and a meaningful reacceleration isn’t expected until the end of 2027.

"If you factor in concessions, if you factor in inflation, there is no rent growth," Arias said.

The industry faces headwinds that could further hinder its growth and bring the industrial vacancy rate up to 9%, according to the report.

Tariffs, which have volleyed back and forth between the U.S. and other trade partners since their implementation in April last year, could push vacancies up if they increase or remain elevated for long periods.

Over 2025, the industrial sector on the West Coast felt the impact of tariffs the hardest, and it is still trying to recover, Arias said.

"They're kind of finding their footing at the beginning of 2026, but they saw significant contractions in net absorption over the last year, and significant repricing of rents as well," Arias said. "There was a hit — 100% that was a hit."