President Donald Trump’s tariff battles and trade policies have sent a chill across the U.S. industrial real estate market, with vacancies hitting a high not seen since 2014.

The overall U.S. industrial vacancy rate reached 7.1% in the second quarter, up from 6.9% in the first quarter and a full-percentage-point increase from last year, according to Cushman & Wakefield.

The vacancy rate topped 7% for the first time since 2014, The Wall Street Journal reported. Higher-than-expected tariff rates were announced on the second day of the quarter, which led to companies pausing leasing decisions and stockpiling goods and supplies in their existing distribution centers.

Tenants still leased 29.6M SF more than they vacated in the second quarter, but that was a 32% decrease in absorption year-over-year, according to Cushman & Wakefield. More than 71.5M SF of new construction was delivered.

Absorption fell precipitously between the fourth quarter and the first quarter, from 42.6M SF to 30.3M SF, as Trump began to unleash tariffs, many of which he has since paused.

Although the administration has already enacted a 10% tariff on nearly all imported goods, Trump this week threatened to increase tariffs on various countries, including 25% levies on Japan and South Korea and a 50% tariff on goods from Brazil.

Over the past three months, “the market has been moving in what I would call fits and starts,” Jason Tolliver, head of logistics and industrial real estate at Cushman, told the WSJ.

But Tolliver said in the report that demand for logistics space remained “resilient” as companies accelerated imports to manage tariff exposure.

“This is driving a noticeable uptick in activity beginning in June, as occupiers moved quickly during a window of lighter tariff pressure,” he said.

New construction is down nearly 22%, and the share of speculative development in the pipeline is 62.3%, the lowest level since the fall of 2020, according to Cushman's report.

Average rents are still growing, up 2.6% from last year to $10.12 per SF, with large occupiers seeking the most modern — and expensive — warehouse spaces, Jason Price, Cushman & Wakefield senior director of logistics research, said in the report.

“While absorption is still below historical norms, second-quarter leasing activity and the strength of newer product show that the industrial sector is adapting to shifting market forces,” Price said.