2025 Biannual Industrial Market Overview: Part Two

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!

Ratio of Retail Inventory to Sales Yet to Show Uptick as of March 2025

The U.S. inventory-to-sales ratio declined slightly month over month in March 2025 to 1.29, roughly flat compared to the same time last year. This metric, which reflects how many months’ worth of merchandise retailers have on hand, suggests retailers held inventory equal to 1.29 months of sales. While some import data points to increased shipments ahead of tariffs, the stable ratio indicates that retailers’ levels of goods was balanced relative to their sales volume as of the end Q1 2025.

Vacancy Rate Rose Sharply in Q1 2025, Posting Fastest Year-Over-Year Growth Rate Since Late 2023

According to NCREIF, the national industrial vacancy rates continued its upward trend in Q1 2025, increasing at their fastest pace in over a year. Industrial vacancy rose to 4% nationwide during the first quarter, a 150 basis point increase year over year and up 250 basis points from the most recent low reached in Q4 2022. The last time vacancy rates rose this quickly year over year was in the fourth quarter of 2023.

Tariff Whiplash Drives Steep Decline in Chinese Imports Amid Policy Uncertainty

By the time the Trump administration announced a pending trade deal in June setting tariffs on Chinese exports to the U.S. at 55%, importers had already faced months of volatility and uncertainty. Since February, proposed tariff rates swung sharply—from 10% to 104%—disrupting trade flows. Bureau of Economic Analysis data shows U.S. imports from China declined for three consecutive months through April 2025, with February marking the steepest drop since the onset of COVID-19. In April, import volume fell 14% month-over-month to the lowest level since March 2020, with further declines expected under current tariff conditions.

U.S. Imports Hit Record High in Q1 2025 as Importers Race to Beat Tariffs

U.S. import volumes surged 9.6% quarter-over-quarter in Q1 2025—marking the largest jump since late 2020—as companies likely rushed to bring in goods ahead of new tariffs, with a slowdown expected in the months ahead, even as some tariffs remain in flux amid ongoing trade negotiations.

Over One-Third of Industrial Leases Expire by 2027—Many Far Below Market Rents

Between Q3 2025 and the end of 2027, over 37% of currently leased industrial square footage in major U.S. markets is set to expire. Most of these leases were executed before the 2023 peak in starting rents, meaning many tenants are still locked into below-market rates. As a result, renewals over the next several years could face substantial rent increases.
For leases expiring in the remainder of 2025, the most common execution years—2015, 2018, and 2020—show current rents trailing today’s average starting rents by 47.9% to 74.8%. Leases signed in 2015, in particular, show the largest gap at 74.8%.
Looking ahead to 2026, more than 32% of expiring leases were executed in 2021, where current rents fall 33.4% below today’s starting averages. Another 18.9% were signed in 2020, with an even wider gap of 48.3%.

CompStak Industrial Rent Index Down 2.2% Quarter over Quarter in  Q1 2025, Sharpest Drop since Q1 2020

CompStak’s industrial rent index is down 4.7% from its recent peak at the end of 2023, following negative quarter-over-quarter growth in three of the past four quarters. The 2.2% decline in Q1 2025 marked the sharpest drop since the onset of COVID-19. At its recent peak, the index stood 117% above its baseline value from Q3 2008.

Shorter Lease Term Lengths Persist, with Non-Bulk Deals Marking 10 Straight Quarters of YOY Decline

In Q1 2025, average lease length remained below post-2020 peaks for both bulk and non-bulk transactions — a potential signal that tenants are opting for shorter commitments amid economic uncertainty and evolving trade policy. Bulk deals averaged 76.2 months, down 5.6% from the 2021 peak, though terms have stabilized with no year-over-year declines since Q4 2023. In contrast, non-bulk leases continued to trend downward, averaging 11% below their Q2 2022 peak and marking the 10th consecutive quarter of year-over-year decline — possibly reflecting greater sensitivity to tariffs and tighter capital conditions among smaller tenants.

Ongoing Softness in Industrial Rents Expected to Persist as Trade Concerns Weigh on Demand

The industrial sector continued to soften in Q1 2025, as both starting and effective rents marked their third consecutive quarter of year-over-year declines. Compared to their Q4 2023 peak, average starting rents are down 4.3%, while effective rents have fallen 5.9%. This trend indicates that landlords are negotiating not only on face rents but also on concessions and escalation terms.
While rents ticked up slightly on a quarter-over-quarter basis in Q1, this is unlikely to signal a lasting rebound given ongoing uncertainty in the sector—particularly around demand for space tied to international trade and logistics. Still, rents remain well above prior-cycle levels: as of Q1 2025, average starting rents are 79% higher than in Q1 2020.

Interested in more insights? Download the full report here!