Industrial commercial real estate demand has not collapsed, but the evidence shows it has plateaued. After several years of extraordinary expansion driven by e-commerce growth, supply chain restructuring, and pandemic-era inventory strategies, the U.S. industrial market has shifted into a slower, more normalized phase.

This has potentially profound effects on appraisers, who will need to recalibrate their vacancy and stabilization assumptions.

Checking Demand and Absorption Numbers

CoStar’s May 2026 U.S. Industrial National Report shows the national vacancy rate at 7.5% in Q2 2026, reflecting nearly three years of gradual increases as the market works through elevated supply. Availability (including space under construction) stands at 9.6%.
NAIOP’s Q1 2026 Industrial Space Demand Forecast similarly reports that deliveries in 2025 exceeded net absorption by 220 million square feet, pushing the national vacancy rate higher. These indicators point to a market that remains fundamentally healthy but no longer accelerates at the pace seen between 2020 and 2023.

The plateau becomes clearer when examining absorption trends. CoStar data indicates that net absorption strengthened in the second half of 2025 after a weak first half that included periods of negative absorption. Trailing 12-month net absorption through Q2 2026 totaled 138 million square feet, while deliveries reached 246 million square feet, still outpacing demand but at a moderating pace.

Early 2026 data reinforces this interpretation. While specific quarterly absorption figures continue to reflect normalization, CoStar notes that leasing activity has reverted to pre-pandemic norms overall, with larger logistics buildings (particularly those 100,000–500,000 SF) facing the highest vacancy pressure. Vacancy expansion has been concentrated in the logistics segment (now 8.4%), while specialized industrial and smaller-bay product (under 50,000 SF) continue to perform more resiliently with vacancy rates remaining below 6% in many markets. Supply deliveries are on track to hit an 8-year low by year-end 2026 as the construction pipeline continues to thin.

The Impact on Appraisers

For valuation professionals, this plateau has meaningful implications. The first is the need to consider recalibration of vacancy and stabilization assumptions. With national vacancy at 7.5% and availability at 9.6%, appraisers can no longer rely on the frictional vacancy levels typical of 2021–2022.

NAIOP explicitly notes that vacancy may “increase slightly” in the near term as the market continues to absorb the large volume of 2025 deliveries, and that average rents are expected to remain relatively flat across markets for the next few quarters. CoStar’s data aligns with this view: year-over-year asking rent growth has slowed to 1.4% (its lowest rate since 2012), with quarterly rent growth currently registering 0.0%.

This means appraisers must adopt more conservative lease-up timelines, particularly for second-generation or commodity space that lacks modern features such as high clear heights, robust power capacity, or automation-ready design. Larger logistics facilities are leasing more slowly (median months to lease now exceeding 8 months for spaces over 100,000 SF), while smaller-bay product continues to move more quickly.

Rent growth assumptions also require adjustment. With CoStar reporting only modest 1.4% year-over-year growth and increasing tenant concessions (one major REIT recently noted free rent equating to 3.5% of lease value over the past 12 months), appraisers may want to avoid underwriting aggressive rent increases. Instead, they must differentiate sharply between modern, high-functioning assets and older buildings that may face concessions or slower leasing velocity. CoStar data underscore a widening performance gap: vacancy among logistics buildings over 100,000 SF has risen significantly since 2022, while small-bay industrial (under 50,000 SF) maintains tighter fundamentals due to limited new supply.

Data center development occupies a distinct position within the broader industrial category and warrants separate consideration. According to a national brokerage firm, leasing activity in this segment is on track to set new records in 2026, with vacancy at historic lows and preleasing rates holding in the mid-70% range compared to a historical norm of 40% to 50%. However, according to CoStar News, access to capital has become the decisive constraint, with S&P Global characterizing the environment as an arms race and analysts noting that newer and undercapitalized entrants will find it increasingly difficult to secure financing on favorable terms. Appraisers working in markets with meaningful data center activity should treat this asset class independently, as its vacancy, rent, and cap rate dynamics diverge significantly from the broader industrial market.

Cap rates are another area where slowing absorption exerts influence. CoStar’s Capital Markets Report shows a national industrial market cap rate of 7.3%, with sale prices per square foot up 4.3% year-over-year. While pricing risk remains level as new deliveries slow, the fundamentals (higher vacancy, softer rent growth, and increased tenant optionality) suggest appraisers should monitor for modest upward pressure on exit caps, particularly for older or less functional assets. Repeat-sale price indices from CoStar’s CoStar Commercial Repeat-Sale Indices (CCRSI) (through March 2026) show industrial values generally holding or modestly increasing (value-weighted +1.2% year-over-year; smaller properties outperforming at +3.7%), but with some softening in prime markets.

Investors are becoming more selective, favoring assets with strong power infrastructure, modern design, and locations aligned with resilient demand drivers. CoStar’s capital markets data highlight robust transaction volume—nearly $20 billion in Q1 2026 alone (a 21% increase year-over-year)—with the Sun Belt continuing to lead activity. This geographic divergence further complicates valuation and requires appraisers to rely on highly localized data rather than national averages.

Broader macroeconomic uncertainty is also beginning to factor into occupier decision making. Oil price pressures and rising energy costs could compress operating margins for commercial tenants and potentially soften occupier demand, contributing modestly to leasing headwinds.

The plateau in industrial demand does not indicate weakness; rather, it reflects a sector transitioning into maturity.

Supply and demand are moving toward equilibrium, and the market is becoming more discerning.

For appraisers, this means potentially adopting a more nuanced, evidence-based approach that incorporates realistic lease-up timelines, tempered rent expectations, and sharper distinctions between asset classes and building sizes. The best-positioned properties for this new cycle will be modern logistics facilities and smaller-bay product aligned with current tenant requirements, while older or oversupplied large-box assets will face increasing pressure as the market continues to normalize.

NAIOP’s forecast projects that absorption will continue to improve through 2026, reaching 345.9 million square feet for the full year, before moderating again in 2027, when absorption is expected to total 267.7 million square feet. CoStar’s outlook is consistent, forecasting vacancy to peak below 8% in 2026 before beginning to decline into 2027 as deliveries moderate further. This forward-looking data underscores that the sector could be entering a long plateau rather than gearing up for another surge.

The information contained in this publication is for informational and educational purposes only. It is not financial, legal, or other professional advice, and you may not rely on it for any purpose. To secure professional advice for your particular situation, you must engage one or more appropriate professional advisors to advise you about your situation.