TAG Industrial Watch: April 25, 2026

On the surface, industrial demand across the top 50 metros held up relatively well during the first quarter of the year. About 32.2 million square feet were absorbed on net, up 25.8% year-over-year. Supply continued to outpace demand, but quarterly net deliveries fell to their lowest level since Q3 2014 at 44.4 million square feet. As a result, the vacancy rate only ticked up 10 basis points on the quarter to a fresh 13-year high of 7.8%. Despite the little change in vacancies, annual rent growth decelerated by 60  basis points to 1.6%, the lowest level since Q2 2012.

Beneath the surface, the concerning demand trends that first appeared last year among different property sizes gathered steam. Demand for space in small industrial properties between 10,000 and 50,000 square feet experienced its largest contraction since Q2 2009 at -10.6 million square feet. Midsized properties between 50,000 and 200,000 square feet saw demand fall by -6.4 million square feet, representing the lowest level since Q4 2009. In other words, all of the positive net absorption came from big-box properties over 200,000 square feet that witnessed a three-year high of 49.3 million square feet. Nonetheless, big-box vacancies continue to lead the way, slipping 40 basis points to 9.1%, followed by midsized properties, up 40 basis points to a 13-year high of 8.3%. Despite the struggles of small industrial, vacancies sit at only 5.2%, rising 30 basis points to an 11-year high.

For the first time on record, demand for big-box is single-handedly keeping the industrial market afloat. But with U.S. imports sliding sharply, fundamentally reducing demand for warehouse and logistics space, the question is for how long? Regardless of whether and when big-box space follows suit, investors seeking the next big opportunity should keep their eyes on the bigger picture as the industrial market transitions from reliance upon imports to exports.