Cushman & Wakefield: U.S. Industrial Vacancy Hits 7.0% in Q1 as Absorption Surges to 40M SF and Supply Slows

The U.S. industrial and warehouse real estate market posted its strongest first-quarter absorption since 2023, with 40 million square feet (msf) of net absorption recorded in Q1 2026, according to a market report published April 9 by Cushman & Wakefield. The national vacancy rate held at 7.0% — unchanged from year-end 2025 but 10 basis points below the Q3 2025 cyclical peak — as new supply completions fell to their lowest quarterly level since mid-2017.

Industrial Real Estate Demand Holds Firm Amid Supply Slowdown

First-quarter net absorption of 40 msf represented a 52% increase year over year, according to Cushman & Wakefield. While the figure moderated from the prior two quarters, the firm noted that first-quarter activity is typically the slowest period of the year. Over the trailing 12 months, total absorption reached 198 msf, exceeding full-year totals in both 2024 and 2025 by 31% and 8%, respectively.

Leasing activity remained elevated, surpassing 170 msf for the fourth consecutive quarter. National deal volume rose 10.3% year over year, though it declined 9% quarter over quarter from the prior quarter's peak — the highest level since 2022. The flight to quality persisted, with 61% of leases of 100,000 square feet and larger occurring in buildings delivered this decade.

"Demand for modern logistics space continues to accelerate as occupiers prioritize automation-ready facilities with higher power capacity. In Q1, properties delivered since 2020 captured 68 million square feet of absorption, with nearly half concentrated in large-scale facilities exceeding 500,000 square feet," said Jason Price, Senior Director and Americas Head of Logistics & Industrial Research at Cushman & Wakefield.

Inland Markets Lead Absorption as West Coast Softens

Shifts in global trade policy and geopolitical uncertainty are reinforcing inland supply chain strategies, particularly for large-format users, Cushman & Wakefield reported. Inland markets captured over 90% of first-quarter net absorption, led by Dallas-Fort Worth, Indianapolis, Phoenix, Atlanta, and Charlotte. In contrast, several West Coast markets continued to record occupancy declines amid tenant consolidations and relocations.

Select port-proximate markets along the East and Gulf Coasts posted solid demand, including Houston (4.9 msf), New Jersey (3.4 msf), and Savannah (1.7 msf). Among large-format deals, 54% were in facilities with 40-foot clear heights, while third-party logistics providers and manufacturers accounted for 60% of activity. Inland markets represented 70% of total large-format volume.

New Supply at Lowest Level Since 2017; Construction Pipeline Rises

New supply continued to slow in Q1 2026, with completions falling 27% year over year to 54 msf — the lowest quarterly total since mid-2017, according to Cushman & Wakefield. Approximately 73% of delivered space was speculative. While completions are expected to remain modest through 2026, renewed groundbreakings in high-demand markets pushed the national construction pipeline higher for a third consecutive quarter. Total space under construction now stands at 284.1 msf, up 6.2% annually and the highest level since Q3 2024, with notable increases in Memphis, St. Louis, Columbus, Minneapolis, and Charlotte.

Annual asking rent growth strengthened to 2.1% in Q1, up from 1.1% at year-end 2025, supported in part by tightening fundamentals in several inland distribution hubs. Sixty percent of the 83 markets tracked by Cushman & Wakefield reported positive annual rent growth, with 19 markets exceeding 5% growth. Over the longer term, one-third of markets have recorded rent growth above 50%, led by Philadelphia, Baltimore, Nashville, and Fort Lauderdale — each exceeding 80%.

Outlook: A Clear Inflection Point for Industrial Real Estate Development

"Leasing activity continues to show real durability across markets, size segments, and building types. As we move through 2026, we expect demand to remain resilient, with corporate occupiers staying disciplined and focused on cost efficiency, network optimization and long-term scalability," said Jason Tolliver, President of Logistics & Industrial at Cushman & Wakefield.

Price added that the industrial sector is positioned for steady growth through 2026, with demand expected to reaccelerate in the second half of the year. He noted that vacancy compression is expected to be led by the 500,000-square-foot segment, across both leasing and user purchases, particularly in newer products, as disciplined real estate development keeps new supply in check.

"With new supply moderating and leasing holding firm, the market is moving back toward balance," Tolliver said. "That is creating a clear inflection point where available space should begin to tighten, reinforcing investor confidence and keeping capital active in the sector."

With vacancy declining across three of four regions quarter over quarter — the West rose 20 basis points to 7.9% — and fewer vacant sublease blocks coming to market, Cushman & Wakefield concluded that national vacancy has likely moved past its cyclical peak.

Sources

Cushman & Wakefield Industrial MarketBeat, April 9, 2026