Despite global economic uncertainty, this year is looking to be another solid year for the industrial real estate market – here’s where CRE professionals are turning for a profit.

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Just as the commercial real estate market hoped for an upswing, the Trump administration’s tariffs introduced more market uncertainty and increased recession risk. Facing financial pessimism and changing fundamentals, there’s one sector CRE investors are turning to for steady returns: The industrial real estate market.  

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Much like last year, the industrial market remains the industry’s darling. Industrial property promises investors a rare opportunity to capitalize on stable growth and robust demand, fueled by drivers like e-commerce growth and supply chain reconfiguration.

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Yet the U.S. industrial market is not without its challenges for CRE professionals hoping to turn a profit:

• High demand for prime industrial properties drives up acquisition cost
• Rising construction costs and land prices squeeze profit margins for new construction
• Evolving tenant needs require upgrading facilities with advanced technology to stay competitive

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As an investor, you need deep knowledge of the industrial space before buying commercial property. Our industrial real estate outlook for 2025 looks into three trends fueling growth in the industrial space and identifies four top-performing industrial markets. This industrial property market analysis combines data with actionable insights to help you make informed decisions and maximize returns. 

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Are you ready to uncover the opportunities hiding in the industrial sector? Let’s dig into the trends and markets that define 2025’s industrial real estate market.

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The current state of CRE and the industrial market 

Kicking off this industrial real estate market report with a high-level overview of the CRE landscape, we see a market at a crossroads. Macroeconomic indicators like employment and wage continue to outgrow inflation, according to credit rating agency Moody’s, which predict modest GDP growth in 2025 and don’t see a recession happening. Cause for optimism? 

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If it weren’t for the Federal Reserve and the Trump administration, perhaps. Interest rates have remained flat after the Fed started lowering them last year. While 2025 was supposed to bring lower rates and more clarity, the new administration’s policy changes have renewed CRE investors’ fears of an economic downturn.

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As interest rates and economic uncertainty continue to weigh on the industry, certain types of commercial real estate do better than others. At 20.3% by 2024’s year-end, the office sector has seen the highest vacancy rates in 50 years of Moody’s data. Multifamily, too, has seen rising vacancy rates and low rent growth due to excess supply in recent years. On the other hand, retail has remained stable due to increased consumer spending. And what is going on with the industrial property market?

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The industrial market has been the best performer across commercial real estate and continues to do so. Moody’s projects 3% rent growth in the coming two years – the highest across all property types.  

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The industrial sector also saw a moderate slowdown in recent years – translating into modestly growing industrial vacancy rates and slower rent growth. However, demand for industrial space is growing and quickly catching up to existing inventory – a trend expected to continue throughout 2025 and indicating the start of a growth cycle.

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Source: Moody’s 

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Why is the industrial market outperforming other CRE property types?

Underlying the industrial sector’s net absorption is a number of factors. New construction has slowed down significantly, according to real estate company JLL. New supply declined by 64.11% year-over-year. Just 269.5 million square feet are currently under construction, a shrinkage of 34% year-over-year and the smallest pipeline since 2019. 

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Meanwhile, leasing activity looks healthy with new leases outpacing renewals. Transaction volumes in the industrial sector are up as institutional investors return to the market and liquid debt markets, with robust lending activity across lender types.

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Source: JLL

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So why exactly does industrial real estate continue to outperform while other CRE sectors falter? The answer lies in both the market's fundamentals and evolving economic trends reshaping America's supply chains.

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The industrial real estate market has experienced unprecedented growth in recent years, driven by booming e-commerce, reshoring trends, and government incentives like the Chips Act,” Greg Schementi, president at international CRE firm Cresa, explains. 

JLL predicts the e-commerce sector to grow at 9% annually in the coming years. The average lease size for logistics & distribution and third-party delivery increased 10.6% year-over-year to 245,000 square feet of industrial space. 

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As for demand from the chip-manufacturing industry, the 2022 Chips Act has led to billion-dollar-plus investment announcements. “This is the year to see if companies can navigate the bureaucracy and finally receive money to move forward with plans,” Schementi notes. 

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Finally, Trump’s policy changes and tariffs hope to fuel a reshoring trend, further increasing demand for industrial space. Whether this will happen in the short term remains to be seen but the tariffs will likely impact the industrial sector.

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With the CRE landscape laid out and key drivers for industrial growth explained, what should investors focus on to capitalize on the coming growth cycle?

3 Trends to capitalize on industrial property growth in 2025

Want to maximize your industrial property returns in 2025? According to our industrial market research, you should position yourself to capitalize on these three key trends shaping the sector:

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1. Restructuring supply chains for resilience

The days of just-in-time inventory seem to be behind us. The U.S. is actively restructuring supply chains to build resilience and reduce dependencies or global disruptions.

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"Companies that had previously been removing inefficiency from their supply chains to try to utilize just-in-time inventory to cut every cost realize that there's a much higher cost to super-efficient supply chains, where if you run out of product, that costs you dollars, whereas just-in-time inventory saves you pennies," explains Henry Steinberg, Partner and Global Head of EQT Real Estate.

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Investor takeaway
Target facilities near growing manufacturing hubs or properties with potential for regional distribution. The reshoring trend means increased demand for domestic industrial spaces, particularly in secondary markets with strong transportation infrastructure.

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2. E-commerce expansion driving last-mile demand 

E-commerce sales are at record highs. E-commerce will account for 33 percent of U.S. retail sales by 2027, the Intelligence unit from financial news outlet Bloomberg found, up from 25 percent in 2022. This explosive growth demands more warehouse space in urban areas.

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The last-mile delivery segment in North America is projected to grow 7.5% year-on-year (CAGR), according to research firm Grand View Research, serving the growing demand for deliveries in urban centers. 

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Investor takeaway
Focus on investing in small distribution centers (30,000-80,000 sq ft) near growing urban centers. These industrial properties have premium rents due to limited supply and high demand from e-commerce companies needing quick delivery capabilities.

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3. Technological advancement and facility modernization

Modern warehouses require robust technological infrastructure. Industrial users increasingly want "highly amenitized buildings that meet power demands, the ability for flexibility of space, generous clear heights, energy efficiency, and in some cases child-care and wellness programs," according to Greg Schementi at Cresa.

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AI is revolutionizing warehouse operations, with AI-driven systems tracking inventory, detecting misplaced items, and identifying damaged goods. ESG considerations are also reshaping industrial property standards.

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Investor takeaway

When evaluating properties, prioritize those with robust power capacity, flexible layouts, and modern technological infrastructure. Consider budgeting for retrofits that increase property value and attract premium tenants. The premium for sustainable industrial spaces will likely increase as environmental regulations tighten and tenant preferences evolve.

Top performing industrial markets in 2025

While industrial real estate remains strong nationwide, certain markets stand out from the national average with strong fundamentals, labor markets, and future growth potential. Below are four industrial real estate market reports that identify some of the U.S. market’s prime locations for industrial demand.

Cleveland industrial market report

Cleveland is leading the nation's industrial investment markets in 2025, according to CRE marketplace Crexi. With a remarkably low 2.6% vacancy rate and asking rents averaging $4 PSF, Cleveland makes for a compelling case for industrial investors. 

The city's strategic infrastructure continues to attract logistics and manufacturing businesses, with the median sale price for industrial space at just $50 PSF – a lot more affordable than coastal markets. And with industrial cap rates in Cleveland averaging 8.6%, investors are looking at potentially higher yields compared to other major markets.

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Nashville industrial market report

Nashville is among the best-performing industrial markets in the Southeast. The market shows particularly strong demand for newer facilities, with completions after 2014 capturing 47% of leasing activity in 2024, according to CRE firm Avison Young.

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Nashville’s strategic location provides access to half the U.S. population within a day's drive, making it a logistics powerhouse. Industrial cap rates in Nashville

average 5.0%, according to CRE firm Crow Holdings' 2025 market outlook.

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Atlanta industrial market report

Atlanta's strategic location and robust transportation infrastructure have attracted major corporations like Microsoft, Google, and Cisco. Last year, brokerage Matthews ranked Atlanta among the top five U.S. markets for industrial investment. Last year, its industrial market showed $4.3 billion in transactions, 6.3% in rent growth, and average asking rents around $9.66 per square foot. 

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With a cap rate of 6.8%, new developments set to arrive this year, and demand expectations on an upward trend, Atlanta remains an interesting market.

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Charleston industrial market report

While the above cities show strong fundamentals coupled with high occupancy, Charleston presents investors with a different opportunity. The city currently faces a high vacancy rate of 19.8% due to significant new deliveries since 2023, according to Avison Young – but the industrial market shows promising long-term fundamentals. 

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The construction pipeline has cooled significantly, down 60% year-over-year, setting the stage for absorption to catch up with supply. Asking rental rates continue to rise, up 4.2% year-over-year, despite high vacancy rates – indicating long-term investor confidence in this port-adjacent value market.

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Three scenarios for industrial vacancy rate in Charleston to return to around 5%‍

 Source: Avison Young

Navigating the industrial property market in 2025

As we've seen throughout this industrial real estate market report, the sector continues to outperform other commercial property types despite macroeconomic uncertainty. The data supports targeting industrial assets in 2025 for several reasons:

• Strong fundamentals with 3% projected rent growth
• Declining construction pipeline creating favorable supply-demand dynamics
• Structural economic shifts driving long-term demand through e-commerce and supply chain reconfiguration

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For investors ready to capitalize on these opportunities, focus on properties with modern technological infrastructure in markets showing strong absorption and reasonable valuations.

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As an investor, keep in mind that navigating this market requires both capital and speed to move quickly when rare opportunities arise.

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[From bidding on industrial property to closing the deal, leverage Duckfund’s equity financing for expertise and liquidity. Get up to $100 million in just five days to help you secure the deal from start to finish.] 

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