2025 Biannual Industrial Market Overview: Part Three

As the industrial market recalibrates in 2025, shifting trade dynamics, softening rent trends, and evolving tenant behavior are creating new risks—and opportunities. In this blog series, we’re breaking down the most important insights from CompStak’s latest Biannual Industrial Report.

In this post, we’ll take a closer look at the industrial market and what it means for landlords, tenants, and investors navigating today’s industrial landscape.

Interested in the full insights? Download the full report here!

Bulk Industrial Rents Continue to Fall Faster Than Non-Bulk, With No Clear Signs of Stabilization

In Q1 2025, bulk industrial leases continued to show deeper declines from peak rent levels compared to non-bulk transactions. Average starting and effective rents for bulk deals were down 4.3% and 6.1%, respectively, from their recent peak—outpacing the declines of 2.3% and 5.2% seen in non-bulk leases. Both segments have now recorded three consecutive quarters of year-over-year declines in effective rent, with the sharpest drop occurring in Q4 2024.
Although Q1 2025 showed signs of moderation, it’s premature to suggest the market is stabilizing. Prior to this quarter, the sector experienced eight straight quarters where each year-over-year change in effective rent declined more than the last.

Renewal Rent Growth Falls Faster for Bulk Leases Than Non-Bulk, Eroding Earlier Pricing Power

Since 2019, the average rent increase at renewal—measured by comparing the ending rent of the prior lease to the starting rent of the renewed lease at the same location—peaked in Q4 2023 for both bulk and non-bulk industrial leases. Bulk transactions have consistently shown the highest renewal rent increases, averaging over 30% as of Q1 2025. Both lease types saw a steady climb in renewal premiums from Q1 to Q2 2023. However, since the peak, rent increases at renewal have declined more sharply for bulk leases—down 790 basis points—compared to a more modest 180 basis-point decline for non-bulk leases. These trends suggest that while landlords of larger (bulk) spaces initially held greater pricing power during renewals, they are now experiencing more downward pressure on renewal rent growth, while non-bulk transactions have more stable trends.

Tenant Leverage Grows: Free Rent Share Rises Sharply, Especially in Bulk Deals

Landlord concessions continued to rise in Q1 2025, particularly for bulk transactions, as the average share of lease term granted as free rent reached new cycle highs for both bulk and non-bulk deals. However, the increase has been more pronounced in the bulk segment, where the average free rent share hit 4.4% of term—significantly higher than the 3.0% average for non-bulk leases. While average lease terms have shortened from their peak, the increase in free rent months has outpaced that decline, shifting overall market dynamics more in favor of tenants.

Escalation Rates Drop Sharply for Sub-100K SF, Short-Term Industrial Leases

Annual average lease escalations have declined the most from their recent peak for sub-100,000-square-foot transactions, especially those with lease terms under five years—suggesting tenants are gaining leverage in this segment of the industrial market. In contrast, smaller leases with terms over five years still command the highest average escalations (3.63% as of Q1 2025), though their premium over long-term bulk leases has narrowed significantly—from a 25-basis-point spread in Q1 2023 to just 5 basis points in Q1 2024. These trends suggest that tenants in bulk transactions have not achieved the same level of leverage in negotiating lower escalations as smaller tenants have, although both continue to average above pre-COVID levels.

Top Five Most Valuable Deals by Major Market, Q4 2024 – Q1 2025

The top five lease transactions from the last two quarters in the Los Angeles-Orange-Inland industrial market were geographically dispersed with none of them taking place in the same submarket. As one might expect, the top three deals by value in this market from Q4 2024 to Q1 2025 involved tenants in the logistics and distribution sector with the top spot going to Komar Distribution Services for a total of $201.7 million.
While logistics and distribution tenants were also represented in the top five most valuable deals in the New Jersey-North and Central market, new leases were the most common transaction type. Only the top deal by value in this market was a renewal/expansion signed by Imperial Dade for $166.7 million. The Monmouth submarket also notably netted two of the top five deals by value signed by tenants Logistics Plus and Discovery SCM.
New leases were less common in the Philadelphia-Central PA-DE-So. NJ list of top most valuable deals over the prior two quarters. Only CIRRO Fulfillment, who inked a lease for $58 million in the Bucks County submarket and topped the list, was a new transaction.
Top deals by value in the Atlanta industrial market were concentrated in the Northeast Atlanta and South Atlanta submarkets. The most valuable deal was signed by Living Spaces Furniture, who leased over 1 million square feet in the Northeast Atlanta submarket for $94.6 million.
Chicago Metro’s South Suburban submarket swept the list of top five deals by value, seeing four out of five of the most valuable deals from Q4 2024 to Q1 2025. RJW Logistics signed the number one most valuable lease over this period for a total of $66.4 million.  The second most valuable slot went to Hu-Friendly Mfg. Co. in the Northwest Suburban submarket for a deal valued at $39 million.
Perhaps most interestingly, no logistics or distribution sector tenants made the list of top five most valuable deals in the Dallas-Ft. Worth market over the past two quarters. Instead, the list of most valuable was dominated by manufacturing, consumer goods, and food & beverage tenants. Ariat Boots inked the most valuable deal over that period at $115.6 million for over 1.2 million square feet.