Industrial Market Numbers Aren’t Telling the True Story

By Michael Plumb | September 2, 2025

 

A recent Wall St. Journal article reported that the U.S. industrial real estate sector has struggled for the past three years, reaching an 11-year high of 7.6% nationally – causing owners, investors and developers to take pause. But the numbers don’t always tell the full story. In fact, many U.S. industrial real estate markets are reverting to their historically healthy levels of supply and demand.

The cyclical nature of industrial real estate development can sound false alarm bells. It’s simply a case of supply not being as fluid as the needs of users. Acquisition and financing challenges, lengthy entitlement periods, construction timelines, weather and supply chain considerations can all temporarily drag down industrial market fundamentals.

How the Cyclical Nature of Industrial Can Fool Us

Many major U.S. industrial markets saw massive amounts of new construction deliveries during the COVID-19 pandemic, and the resulting excess supply has played a starring role in the misguided narrative that industrial is struggling. According to Lee & Associates’ Q2 North America Industrial Market report, the inventory of logistics buildings between 100,000 and 500,000 square feet in the U.S. has grown by 14% since 2021. Concern over the impact of tariffs has slowed down tenant growth in logistics, adding another layer of complexity to the industrial story. Nationally, new deliveries are still outpacing tenant expansions.

Generally speaking, the industrial sector lags the overall economy and is slower to respond to shifts in demand. In Chicago – the nation’s largest industrial market with more than 1.4 billion square feet of inventory – the entitlement process alone can range from 4-6 months on a typical timeline and 12 months or more when a rezoning or complex infrastructure upgrade is involved.