US Warehouse Sector Hits Rare Post Boom Reset
Shifting Demand and Market Dynamics The demand for U.S. warehouse space has undergone significant shifts amidst ongoing macroeconomic uncertainties. This highlights a complex environment for industrial real estate investors. In Q3 2025, net absorption surged to 60 million sq. ft. This growth was primarily driven by big-box markets and build-to-suit activities, especially in Phoenix and Indianapolis. However, overall absorption for the entire year was lower compared to 2024. This decline was due to a realignment in demand. As the Phoenix Data Center Boom continues, new warehouse demands are driven by the need for supporting infrastructure such as power substations and fiber optics. Vacancy rates climbed to 7.4% in Q3, reflecting the changes in market dynamics. Market segmentation is becoming more pronounced. There is a clear trend towards flight-to-quality, with newer post-2020 facilities gaining 196 million sq. ft. in occupancy. Conversely, older spaces saw a loss of 88 million sq. f...