June 2025 Newsletter
🔎Mid-Year Market Review 2025: Key Shifts in Industrial Real Estate
Our team has spent the month of May absorbing market intel. We started the month in Las Vegas at the 2025 SIOR Spring Conference and ended the month as sponsors and speakers at the Montrose Group’s 4 th Annual Economic Development & Policy Forum. We have been using the term “choppy” for the first 4 months of 2025. Now, I think we are in a stage of “recalibrating” in the industrial real estate sector. After years of breakneck growth, we’re seeing signs of stabilization — with fresh data offering both caution and opportunity.
Here's what you need to know.
🔍 Top Trends Shaping Industrial Real Estate
1. From Growth to Stabilization
Some markets have been overbuilt, along with the increase in borrowing costs, and have added significant strain on institutional capital. Thus, putting occupiers back in the driver seat. Rates have stabilized, however, added concessions and creative deal making are back.
2. Flight to Quality
Modern, efficient, and flexible facilities are in high demand. The average U.S. manufacturing facility is over 50 years old. Companies are increasingly integrating office and distribution functions into single locations, driving demand for higher-quality finishes and expanded parking. Modernization is a growing priority.
3. Resilient Supply Chains
Companies are doubling down on onshoring and regionalization, minimizing exposure to global disruptions and building buffer capacity. Industries that are hot in 2025 are tech, pharmaceutical, defense, and anything that is processing or manufacturing with raw earth materials to make batteries.
4. Policy & Tariff Influence
Evolving trade policies and government intervention has created uncertainty and is directly impacting site selection and capital deployment.
5. Labor is Strategy
Access to skilled labor is driving location decisions more than ever, especially in advanced manufacturing sectors. Companies are engaging with the communities to increase the manufacturing skills needed on the K-12 level.
⚠️ Challenges in the Market
- Rising Vacancies & Slower Rent Growth: Rents are flat Q1. Supply has outpaced absorption in many metros.
- Delayed Decisions: Occupiers are pausing large moves, favoring short-term renewals while they wait for clearer economic signals.
- Construction Cooldown: New starts are down sharply, setting the stage for a potential demand-supply rebalancing by 2026. Potentially another “hockey stick” effect we saw in 2022.
💡 Opportunities on the Horizon
- Short-Term Leases = Long-Term Wins: Investors are eyeing well-located, under-rented assets with flexible lease terms in key markets that are well positioned for long term growth.
- Tech & Automation: Warehouses are evolving into smarter, more efficient hubs, driving investment in robotics, AI, and IoT.
- Regional Momentum: Markets with robust labor pools, energy infrastructure, and population access are best positioned for growth.
- Power: With more manufacturing requirements, the need for power becomes more relevant. Areas that have power or land holders that can provide other power alternatives will have an advantage.
🧭 Strategic Takeaways for H2 2025
- Focus on Quality: Older stock is losing relevance. Invest in modern, sustainable, flexible assets.
- Stay Agile: Occupier behavior is evolving rapidly. Flexibility in deals and timelines is key.
- Watch the Policy Landscape: Government incentives and trade dynamics will continue to impact market behavior.
- Labor First: Site selection strategies must prioritize workforce availability and upskilling potential.
👋 Final Thoughts
Industrial real estate isn’t cooling, it’s transforming. The second half of 2025 presents a prime opportunity to reposition portfolios, embrace modernization, and lead with agility in a changing economic climate.
If you're navigating the industrial space, whether as an investor, developer, occupier, or advisor, now’s the time to rethink, reposition, and get ahead of the next cycle.
🔗 Sources: NAI, JLL, CBRE, Cresa, NAIOP, EQT, Plant Moran, MMCG, Newmark, Colliers, and others
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