The NAIOP Research Foundation’s latest Industrial Space Demand Forecast projects steady improvement in U.S. industrial real estate fundamentals as economic conditions stabilize and occupiers regain confidence following a turbulent 2025.

Greater clarity around interest rates and reduced concerns about the effects of tariff policy have helped improve the outlook for 2026, according to the report. While political and economic risks remain elevated, the forecast anticipates steady improvement in leasing activity over the next two years.

The forecast anticipates that net absorption will reach 154.8 million square feet in the first half of 2026, total 345.9 million square feet for 2026, and moderate to 267.7 million square feet in 2027.

More key takeaways from the report:

• Vacancy rates may increase slightly this year given the recent pace of deliveries and the current forecast for net absorption. As a result, average rents are expected to remain flat over the next few quarters.
• Demand for industrial real estate is being supported by continued growth in consumer spending and e-commerce. Online sales in the third quarter grew 5.1% year over year, and e-commerce’s share of total retail sales reached 16.4%, surpassing the previous record high in the second quarter of 2020.
• Leasing by logistics, distribution and third-party logistics firms has risen, while the supply of suitable space remains limited as many occupiers seek to replace aging assets. This dynamic can support occupancy and rent growth for newer space, particularly in metro areas where the supply of modern logistics buildings is tight.
• With core inflation still running above target, borrowing costs are unlikely to fall quickly, which could slow the pace of new commitments for industrial space.
• If hiring weakens further or turns negative in 2026, consumer spending could contract more quickly than in past cycles, creating risks for industrial demand even as lower rates would support borrowing and investment.

“We’re seeing businesses expand their logistics footprints as supply chain activity normalizes and operating conditions become more stable,” said Marc Selvitelli, CAE, president and CEO of NAIOP. “This renewed sense of predictability is contributing to a healthier outlook for industrial demand in the year ahead.”

The semi-annual report is authored by Hany Guirguis, Ph.D., dean, O’Malley School of Business and professor, economics and finance, Manhattan University; and Joshua Harris, Ph.D., executive director, Fordham Real Estate Institute, Fordham University.

Download the full NAIOP Industrial Space Forecast: naiop.org/industrialdemand